1 


/ 


1 


h 


SOME  FACTORS  IN  THE  DEVELOPMENT  OF  CHAIN  STORES 


GEORGE  ROBERT  MACH 

B.  S.,  University  of  Illinois,  1921 


THESIS 


SUBMITTED  IN  PARTIAL  FULFILLMENT  OF  THE  REQUIREMENTS 
FOR  THE  DEGREE  OF  MASTER  OF  SCIENCE  IN  BUSINESS 
ORGANIZATION  AND  OPERATION  IN  THE  GRADUATE 
SCHOOL  OF  THE  UNIVERSITY  OF  ILLINOIS, 

1922 


URBANA,  ILLINOIS 


Digitized  by  the  Internet  Archive 

in  2016 


https://archive.org/details/somefactorsindevOOmach 


/"S  Ta 


1 9aa 

M 18  I 

UNIVERSITY  OF  ILLINOIS 
THE  GRADUATE  SCHOOL 


I HEREBY  RECOMMEND  THAT  THE  THESIS  PREPARED  UNDER  MY 


BE  ACCEPTED  AS  FULFILLING  THIS  PART  OF  THE  REQUIREMENTS  FOR 


Recommendation  concurred  in* 


Committee 

on 

Final  Examination* 


•Required  for  doctor’s  degree  but  not  for  master  s 


509407 


INTRODUCTION . 


In  T:eginning  a study  of  chain  stores  it  is  essential  from  the  outset 
to  have  clearly  in  mind  a definite  idea  of  what  the  term  ’’chain  store”  riieans. 

One  may  pick  up  half  a dozen  hooks  on  merchandising  and  find  in  them  perhaps 
half  a dozen  different  definitions.  ITystrom,  in  his  Economics  of  Retailing,  de- 

f 

fines  a chain  store  system  as  a nuiiher  of  retail  stores  operating  under  one 
management.^  Obviously  such  a definition  excludes  groups  of  stores  v/hich  are 
separately  ov^ued  and  managed,  as  the  Rexall  drug  stores  and  the  Winchester  hard- 
ware stores.  Butler  says  that  if  we  confine  the  term  strictly  to  stores  ’’under 
one  ownership  and  direction,”  then  retail  corporations  and  manufacturers ’ chains 
are  the  only  ones  properly  inclu-ded.  He  would  include  retail  huj^ing  associations, 
or  ’’combines, " as  the  Rexall  dr’j.g  stores,  the  American  Drug  .Syndicate,  and  the 
United  Buyers ' Service;  likewise  consumers’  cooperative  retail  chains. 2 
Copeland  says  that  a chain  store  system  is  a group  of  scattered  stores  with  a 
single  ownership  and  centralized  management.'"  Cheringtcn  realized  the  diffi- 
culty of  giving  a hard  and  fast  definition.'^ 

For  the  purpose  of  this  study  chain  stores  will  be  defined  as  a group 
of  stores  all  centrally  ov/ned  and  operated,  or  collectively  ovmed  and  managed 
for  the  conmon  benefit  of  all  the  members  of  the  group,  or  separately  ov/ned  but 
ov/ning  stock  in  a corporation  for  v/hich  they  act  as  exclusive  agents. 

The  chain  store  is  not  a modern  development  in  our  system  of  distri- 
bution. Credit  is  usually  given  to  the  Great  Atlantic  and  Pacific  Conpany  for 

1 Economics  of  Retailing,  1915,  p.  216. 

•2  Butler,  llarketing  Methods,  p,  SO. 

3 Marketing  Problems,  p.  8. 

4,  Elements  of  Marketing,  p,  30. 


having  started  the  first  chain  store  systeir.  y;ith  the  establishing  of  a srmll 
tea  store  in  New  York  City  in  the  year  1859.  Basically  the  principle  dates 
back  about  150  years  when  Benjamin  Franklin  operated  a chain  of  seven  printing 
shops  with  a separate  partner  for  each.  The  plan  v/as  very  siinils-r  to  one  used 
at  the  present  time  by  the  J.  C.  Penney  Company  (Department  stores),  except 
that  Franklin  finally  retired  from  each  firm.^ 

Most  of  the  early  development  took  place  in  the  East,  v;here  v/e  find 
such  pioneer  organizations  as  the  Jones  Tea  Company  of  Pennsylvania  (Grocery, 
1872),  James  Butler  of  Brooklyn  (Grocery,  1882),  the  V.'oolv/orth  5 and  10  cent 
stores  (lS79) , and  the  Douglas  Shoe  stores  (1876),  and  in  more  recent  years 
the  Liggett  Drug  stores,  the  United  Cigar  Stores,  and  the  Baltimore  and  Childs 
restaurant  chains.  The  chain  store  movement  spread  over  other  sections  of  the 
country  at  a later  date. 

There  are  no  official  figures  showing  the  extent  of  chain  store 
grov;th.  Hurd  and  Zimrcennan  in  Printers*  Ink*^  estimated  that  there  were  approx- 
imately 2,000  chain  systems  with  over  25,000  stores.  In  1915  Boyd's  City 
Dispatch  advertised  that  it  could  supply  lists  of  over  10,000  chain  systems. 

It  should  be  taken  into  consideration,  however,  that  the  latter  figure  includes 
many  chains  which  have  only  two  or  three  stores  in  the  organization.  In  a 
recent  address  before  the  National  Chamber  of  Commerce^,  Nystrorn  said  that  there 
are  nov/  probably  over  2,000  chain  organizations  in  this  country,  with  a total 
of  over  100,000  retail  outlets.  In  an  address  before  the  Ari'.erican  Economdc 
Association  Alfred  K.  Becktaann,  secretary  of  the  National  Chain  Grocers'  A.s- 
sociation,  said  that  less  than  75  chain  grocery  organizations  operate  about 

1"  J.  P.  Heaton,  Manager  Bureau  of  Information  and  Investigation,  Boston  Chanher 
of  Commerce  - in  Current  Affairs,  September  12,  1321, p.  1. 

2 September  to  December,  1914, 

3 Mercantile  Co-Operator,  June  5,  1922,  p.  6. 


> , \ y 


■.li'iU 


>v 


If 

V<v>i 


\ 


♦ w fc; 


L 


-.1- 


j>  *.  • 


rV'“\  Vi’v  '<' 


■rW' 

V ■ 


4 I 


t . A 


•,  t.  ■'  ' •<  »>A>'^  * ' 


' •r  \.( 


-»  Uft,.  U»^ 


t • •» 

■ \ I' 


Vi. 


. i - 


. . v,‘  j.;s:-<^'l,' 
. *•■  ‘ ■ ’■ 

' 

V >^U>*  ' "'  '• 


i;:'  '«»l 


1 


• / . ,'  ■ > i ' 


;vi'._.. 


>1. 


'i- 


'»•« 


t k 


'.{.- '.  i 


.r  . , 


‘IW 

! ^ 


> V 


• » 4 

4.  f V <4  *.  4 / { ' 


■‘f‘ 


hi  r '“.s'il 


‘> »,  ‘v: 

V,1  .;•  l.,.i. 


I' 


< •!  , 


: j 


V ’ * < j >•./•  i-  tf  < . 


Hi 


. ’1  ',\ 


M -- 


f 


r.,  (•"«,!..  ;. 


.1;' 


4 ' 


\ i i4\'  , 


)f  ■ 


■ i 


t ' ■•■  - ^ <' 


3 


50,000  stores.^ 

Such  figures  as  these  do  not  give  as  comprehensive  an  idea  of  the 
grov/th  of  chain  stores  as  might  he  desired.  The  tables  and  charts  on  the  fol- 
lowing page  contain  figures  from  authoritative  sources  and  are  intended  to  give 
a concrete  idea  of  the  enormoiis  growth  in  the  chain  store  field. 

In  view  of  what  ha.s  been  said  above,  it  is  interesting  to  note  what 
is  the  attitude  of  jobbers,  manufacturers,  and  retailers  toward  chain  stores. 

By  going  over  the  literature  of  the  subject  it  is  possible  to  find  a great 
variety  of  attitu.des  on  the  part  of  each  of  the  three  classes  mentioned,  some 
of  them  denoimcing  the  chains,  others  assuming  an  air  of  indifference,  and 
still  others  upholding  the  new  system  of  merchandising. 

In  the  case  of  the  jobbers  it  is  rather  difficudt  to  find  pointed 
statements  which  would  be  of  value  in  a treatise  such  as  this.  However,  a few 
are  available  in  the  wholesale  grocer;/  business.  Theodore  V.liitmarsh,  president 
of  the  National  Vliolesale  Grocers’  Association  makes  the  statement  that  the 
chain  store  is  not  to  be  regarded  as  a serious  menace  to  the  stmll  grocer  even 
with  their  "jnfair  practice  of  "loss-leaders. "2  Nelson  Gray,  secretary  of  the 
V/holesale  Grocers'  Association,  points  out  that  it  is  folly  to  think  that  chain 
stores  are  only  ten:porary  factors  in  the  food  trade.  He  says  that  they  are  a 
legal  and  business  proposition  that  has  the  endorsement  of  many  manufacturers. 
"The  question  that  confronts  the  wholesale  grocer  is  not  how  to  prevent  the 
chain  store,  but  hov/  to  adapt  his  and  his  own  cmistomers'  business  to  meet  the 
nev;  conditions. "2  A large  wholesale  grocer  ran  this  advertisement  in  a trade 

1 Pittsburgh,  December  28,  1921. 

2 Modern  Merchant  and  Grocery  Nor Id,  August  28,  1916,  p.  17. 

3 Modern  Merchant  and  Grocery  World,  January  31,  1916,  p.  6. 


S teres 


35 


0‘s 


ISO 

160 

140 

120 

100 

80 

60 

40 

# 

20 


280 


220 


210 

200 


260 


28 


I 


jk.  ^ 


I 

f 


I 


t 


L 

I 


i 

f 


i 


I,  < 

1“ 


/ 

f 

/ 

/ 


I 


7 


. ’V ; • * ■» 


■) 


4 


t 


\ 


\ : 


1- 


'V 


-i 


i 


•=> 


~V-  * 


¥ 


(-  - i-  < 


•», 


• 


t 

T 

. 

‘i‘ 

< ■ - V. 

-*1*.  _ . 

O 

. 

ores 


i 


r. 


8 


The  followlrxg  tables  are  self-explanatory : 


GROCEEIES 

Chain 

Independent 

Total 

Chains 

Stores 

Stores 

Greater  IJ.  Y. 

13,513 

17 

680 

12,833 

Chicago 

7,510 

10 

130 

7,380 

Philadelphia 

5,200 

9 

1,262 

3,938 

Boston 

2,829 

10 

456 

2,373 

TOBACCO 

Greater  H.  Y. 

2,394 

9 

439 

1,955 

Philadelphia 

2,350 

5 

45 

2,  305 

Chicago 

1,100 

9 

172 

928 

Boston 

308 

2 

16 

292 

DRUGS 

Greater  IT.  Y. 

2,281 

11 

82 

2,199 

Chicago 

1,106 

4 

17 

1,089 

Phi ladelphia 

921 

12 

53 

868 

Boston 

314 

0 

34 

280 

FIv’E-AI'ID-TEIT-CElTT  STORES 

Greater  IT.  Y. 

225 

15 

50 

175 

Chicago 

150 

3 

25 

125 

Phi lade Iphia 

145 

4 

20 

125 

Boston 

32 

2 

7 

25 

EIETEN  YEARS  IIT  RETAIL  GROCERY 

TRADE 

GREATER  lIE\-r  YOEIC 

1903 

1914 

Increase 

Per  cent 

All  stores 

8,750 

13, 513 

4,763 

54 

Chain  stores 

215 

985 

770 

360 

(Graphic  and  Statistical  Sales  Helps, 
p.  107;  Shaw  Pa’olishing  Company) 


jo-urnal;  "The  chain  store... is  threatening  the  survival  of  the  individual  mer- 
chant. Let  us  hecome  ycrxr  ally  to  comhat  this  evil  by  suppl2^ing  your  require- 
ments in  the  grocery  line...."^ 

As  regards  their  attitude  toward  chain  stores,  manufacturers  fall 
into  two  classes,  i.e.,  those  v/ho  sell  to  chain  stores  and  those  who  do  not. 
Without  going  into  the  advantages  and  disadvantages  of  selling  to  chain  systems 
it  can  be  said  that  the  former  class  sees  in  chains  stores  a ready  market,  wide 
distribution,  and  cash.  So  we  find  many  manufacturers  w'hc  sell  their  goods, 
either  in  whole  or  in  part,  in  this  way.  But  there  are  some  manufacturers  who 
will  under  no  conditions  sell  to  chain  organizations.  More  than  that,  there 
are  some  who  vigorously  fight  the  chain  stores.  A typical  example  of  this  class 
is  the  Kellogg  Toasted  Corn  Flakes  Company, whose  attitude  is  shown  by  the  fol- 
lowing statements  extracted  from  a letter  sent  to  its  jobbers;  "We  have  announced 
to  the  trade  quite  firmly  that  we  will  not  sell  the  chain  stores  ':jntil  either 
the  government  forces  us...,  or  the  chain  stores  become  such  a dominant  factor 
that  we  cannot  refuse  longer  to  sell  them  direct....  Any  jobber  is  blind  who 
shuts  his  eyes  to  the  increasing  iranace  of  the  chains...."  The  remainder  of 
the  article  is  a pilea  for  the  support  of  retailers  and  jobbers. 2 

The  attitude  of  the  retailers  has  been  as  varied  as  that  of  the 
jobbers  and  manufacturers.  In  the  first  place,  there  have  been  retailers  who 
threw  up  their  hands  and  quit  as  soon  as  a chain  store  opened  its  doors  near 
their  location.  Such  retailers  spent  their  energy  in  denouncing  rather  than 
progressing.  The  attitude  of  the  second  class  of  retailers  is  illustrated  in 
the  case  of  the  merchant  who  adepts  the  policy  of  laissez-faire  when  a chain 

. 1 Modern  Merchant  and  Grocery  World,  Februarjr  5,  1917,  p.l5. 

2 Printers*  Ink,  September  17,  1914,  p.23. 


.-a 


"i  ^ 

opens  a store  near  him.  It  is  possible  to  find  many  examples  of  this  class, 
the  outstanding  characteristics  of  v;hich  are  lack  of  adaptation  to  new  circum- 
stances, and  a decrease  in  sales  and  profits.  The  third  type  comprises  those 
merchants  who  are  so  alert  and  progressive  as  to  be  able  to  see  the  advantages 
of  chain  store  methods  and  apply  them  to  their  ov/n  business.  These  are  the 
merchants  who  learn  from  chain  stores  and  consequently  welcome  them  as  instru- 
ments for  generally  raising  business  efficiency.  A high  official  of  a prominent 
chain  system  is  often  quoted  as  asserting  that  he  could  open  an  independent 
store  next  to  one  of  his  chain  stores  and  almost  force  the  chain  store  to  close 
its  doors.  It  is  a pretty  generally  accepted  fact  that  chains  are  maldng  in- 
dependents better  merchants.^ 

In  connection  with  this  phase  of  the  problem  it  might  be  well  to 
examine  some  of  the  iiterat’ore  of  the  Illinois  Chamber  of  Cormc-erce.  This  or- 
ganization has  been  for  a long  time  interested  on  the  subject  of  "The  Relation 
of  the  Chain  Store  to  the  Coimunity."  A cori2::itt8e  was  appointed  by  the  Illinois 
Chai'nber  of  Coxiraerce  several  months  ago  to  study  the  "Chain  Store  .'Tvil."  The 
coimr.it tee  found  that  eighty-three  out  of  261  chain  stores  in  forty-five 
Illinois  cities  outside  of  Chicago  are  members  of  local  chaimbers  of  coxnmerce; 
but  of  the  eighty-three  the  managers  of  forty-one  rather  than  the  concerns 
themselves,  hold  mexabership.  Forty- three  of  the  fort3^-five  towns  reported 
that  such  large  chains  as  V/oolvxorth  and  Kresge  belong  to  the  Chamber  of  Coxamerce. 
The  findings  of  the  committee  are  given  in  full: 

1.  Changes  in  the  personnel  in  chain  stores  are  more  frequent ; 
therefore  the  local  chain  store  manager  does  not  become  a part 
of  the  coiaaunity. 


1 Printers’  Ink,  Ai:ril  5,  1917,  p.  101 


2.  Profits  are  not  invested  in  the  local  coirjr.iunity. 

3.  There  is  no  personal  comra-oiiity  service  rendered  by  the  chain 
stores, 

4.  The  chain  store  contribates  very  little  money  to  the  coirii'anity . 

5.  Thera  is  not  the  close  personal  contact  betv/een  employee  and 
employer  in  the  chain  store  that  there  is  in  the  local  store. 

6.  Hecognition  of  service  of  the  employee  is  slower  in  the  chain 
store,  due  to  the  standardization  of  wages  and  methods  of  ad- 
vancement . 

Mr.  J.  J.  Burgess,  president  of  the  Rock  Islcand  Chamber  of  Cocmerce, 
concluded  the  article  in  the  following  mianner:  "Chain  stores  have  no  interest 

in  yo-or  tov/n  other  than  the  profit  that  they  can  gain  there.  They  do  not  ac- 
quire any  property.  The  miaiiagers  do  not  become  home  owners.  They  do  not,  as 
a rule,  do  their  banking  in  your  own  town  any  longer  than  is  required  to  secure 
a draft  to  send  their  money  back  to  headquarters.  They  do  not,  excej^t  rarely, 
assist  yo'or  newspapers  to  exist,  so  that  you  will  have  a medium  of  publicity 
when  you  waiit  to  boost  something  for  the  good  of  your  tovm.  They  ;vill  never 
enter  into  any  collective  trade  expansion  work.  It  is  said  that  a man  who 
will  take  no  part  in  civic  affairs  or  advancecient  is  stealing  a ride  on  the 
chariot  of  progress.  The  chain  stores  are  those  people. 

The  reinainder  of  this  introductory  chapter  is  to  give,  in  a general 
way,  the  plan  of  the  study.  The  thesis  is  divided  into  ten  chapters,  not 
including  introduction  and  conclusions,  and  presents  a fionctional  study  of 
chain  stores.  ITo  attempt  has  been  made  to  cover  the  entire  field  - it  v/ould 
take  perhaps  several  years  to  do  this  - but  i’ather  to  present  sor’e  of  the  out- 
standing methods  of  perforiiiing  the  various  functions.  Consequently  each  chapter 
may  be  taken  as  a separate  study. 


1 Illinois  Journal  of  Comr:.erce,  June,  1932,  p.7. 


t 4*- 


13 


and  "CO”  uiaans  that  a consolidation  has  taken  place.  Thus,  if  the  name  of  an 
organization  is  followed  hy  "I",  "P",  "C",  "R",  and  "CS",  it  means  that  it  has 
passed  through  five  stages  of  development,  viz.,  individual  proprietorship, 
partnership,  incorporation,  reincorporation  or  recapitalisation,  and  consolida- 
tion.^ 


F.  Woolworth  Campar^y 

5-and- 10 

I 

P 

C 

R 

CS 

S.  S.  Kresge  Company 

II  It  I! 

I 

P 

C 

R 

CS 

United  Cigar  Stores 

Tobacco 

C 

R 

CS 

W.  T.  Grant  Company 

Dep ' t 

I 

•D 

X 

C 

United  Drag  Company  (Eexall) 

Drags 

c 

R 

CS 

Kroger  Groc'y  £;  Baking  Co. 

Groceries 

I 

P 

c 

R 

CS 

Great  A.  & ?.  Tea  Company 

II 

I 

P 

c 

E 

CS 

J.  C.  Penney  Comijany 

Dep' t 

I 

p 

c 

R 

Piggly-Wiggly  Stores  Company 

Groceries 

c 

R 

CS 

Owl  Drag  Company 

Drugs 

c 

VM  L.  Douglas  Shov;  Company 

Shoes 

I 

c 

p 

Regal  Shoe  Company 

II 

P 

c 

R 

Mr.  Bowers'  Stores  Company 

Groceries 

I 

c 

Jones  Brothers  Tea  Company 

It 

I 

P 

c 

R 

CS 

From:  these  results  it  is  per:. 

.issible  to  conclude 

that 

the 

re  has 

been 

a more  or  less  general  tendency  in  the  evolution  of  the  organic  structures  of 
chain  systems,  and  that  this  evolution  has  been  in  fonr  steps  as  indicated  above. 
The  reason  for  t/iis  common  evolution  can  clearly  be  seen  by  examining  the  finan- 
cial history  of  one  of  the  typical  chain  organizations  and  citing  other  exangsles, 

1 This  information  was  obtained  from  Moody's  Manual,  1905-1921,  and  by  means 
of  questionnaires. 


2 ' '' 

• r 


t 


i 

■ i 


I 

I 


J 


, ! 

i i 


‘ i 


\ 


4,i- 


' (V../ 


/ci 

1 “ 


u 


— 1 


4* 


'1*  .Hi- 


i, 


V ... 


r 

'•  ; / 

i(  i 


r-, 


I . ' 


! .1 


• I 


• .-i 


14 


The  S.  S.  Kresge  Company  was  formed  i :divi dually  hy  Mr.  S.  S.  ICresge 
in  1897,  and  ncw^  operates  a chain  of  1S9  Five  and  Ten  Cent  Stores  in  171  cities 
and  tovms  located  in  24  states.  Between  189?  and  the  date  of  its  incorporation, 
1312,  the  comreaij?’  opened  on  an  average  four  stores  pier  year  solely  throiigh  the 
reinvestment  of  surplus  earnings.  In  1912  the  company  was  incorporated  rath  a 
capitalization  of  $2,000,000  C’.Tioulat ive  7?^  preferred  stock  andOS, 000, 000  common 
stoclr.  In  an  analysis  of  the  company  the  statement  is  given;  "The  nev/  money 
provided  hy  the  sale  of  this  stock,  together  with  the  use  of  surp'lus  p^rofits,  en- 
abled the  corrpany  to  broaden  the  field, of  its  chain  rmch  faster....  The  intro- 
duction of  new  capital  also  enabled  the  company  to  develop  more  profitable  ter- 
ritory, and  to  op^'erate  under  more  satisfactorj^  conditions  afforded  by  larger 
quantitative  purchasing  and  a relatively  lower  cost  of  operation  per  store."  In 
1915  the  company  was  reincorporated  and  the  authorized  $5,000,000  of  couuon  stock 
raised  to  $10,000,000.  Lilcewise  in  1920  the  cora.:on  stock  was  increased  to 
$20,000,000,  and  $3,000,000  of  bends  were  sold  to  bankers.  In  both  cases  the  ad- 
ditional n.oney  was  used  for  providing  additional  merchandising  facilities  - for 
empans  x on . 

A study  of  Liany  other  chain  systems  has  revealed  much  the  sarie  devel- 
opment  as  above. 

Tliat  this  evolution  in  chain  stores  has  been  perfectly  natural  and 
logical  is  evidenced  by  the  fact  that  in  all  the  organizations  studied  the  prinury 
reason  for  passing  through  the  various  stages  was  to  get  outside  capital  with 
which  to  facilitate  op'arations.  A secondary  reason  was  that  the  fo\inders  of  chain 


1 April,  1922 

George  H.  Burr  and' Corapany,  Investment  Eard^ers,  New  York 
3 F.  7'.  Woolworth,  V/.  T.  Grant  Cavpany,  '^hs  Great  Atlantic  and  Pacific  Tea  Company 
'!J.  L.  Dcruglas  Shoe’ Company,  Regal  Shoe  Compai-iy,  Jones  Brothers  Tea  Company, 
Nroger  Grocery  and  Banlcing  Cor;.pany,  J.  C.  Penney  Corr,p)any,  United  Drug  Company, 
and  United  Cigar  Stores  of  America. 


1 


U. 

[ tl 


4 


. . I*  f t > 


i. 


{ . 


^Sx 

< 


, n.,  ■ ■ ; ..  •% 


jir.*'.-i  -V 


If.  < 


I ;■ 


■■  - • • •'  ••V*  • f»  • •••..< 


-L:  '. 


f ' 


} i 

I, 


1C 


fH 


Si 

o| 

. i 

C£j, 

9! 

m| 


£3 

CD 

cn 

£-1 

■P 

CD 

tw 

d 

ej 

C 

CD 

cd 

0 

S*  ca 
o 

-P  CD 
•H  tu) 
U d 
u c 
0 d 

:s 


c 


a 

c 

c 

c 


'C 

s 

K 

4: 

t 

s- 


!+= 

5® 

ff 


Board  of  Directors 


p 

rH  C 

Oj  o 

© 

•H  a 

u 

o P 

OJ 

§ i 

CQ 

erf 

© 

•H  © 

t-i 

O 

Eh 

in 


-P 

C 

(Q 

•C5 

•ri 

la 

Q 

U 

PU 


-p 

c 

0} 

Xi 

•H 

(a 

o 

u 

a* 


c to 

© ««  C 
XJ  O P 
P CO 

© © p 

© to  *o 
C 

Ph  cJ 

U3 

« ^ ^ 

© o o 

© 

O 5-. 

>. 

PC© 

es 

to 

X3 

§ 

© 

ra  bu 

u ^ 

S C 

•rf  Ci) 

o oJ 

fc»0 

P 43 

V<  cd 

C3  O 

CtJ  « 

3S  X 

$-«  cd 

o W 

Eh  *7 

> 


bO 

s: 

•H 

CQ 

'4 

O 

® 

P. 

oj 


CO 


ce; 


£-< 

CO 


M 

£^ 

Qi 


o> 

<3> 


02 


ai 


U 

SiO 

g5 

S 


i-{ 

o 

ra 

u 

o 

cu 

® 

-1-^ 

>> 

rQ 


-p 

-p 

•rl 

!-< 

pe 

o 

p 

p 

o 

I — I 

cd 


p 

G 

<M  W 

© 

o p 

S 

© © 

-p  ^ 

o fco 

« o 

•fH  erf 

Pt  o 

vi  q 

© o 

«tn  cd 

O 

U 
d) 
I — I 
I — i 

o 

u 

p 

n 


o 

o 


o 

u 


j 

i 

f 


s:! 

o 


Board  of  Directors 


lb 


c 

o 

f-S 

■¥> 

O 

B 

o 

S-, 

iX,  u 

<D 

U bO 
<D  (rf 

§ 

00  X . 


CD 

iH 

G 

Cd 

o 

00 

•H 

-p 

o 

a 

• 

Oi 

o 

u 

a 

u 

to 

< 

Ot 

CD 

a 

to 

a 

03 

G 

?>» 

® 

a 

•iH 

•H 

G 

1 

rH  M 
3 .H 

C 

G -P 

•r^ 

® 

o 

O G 

rH 

rH 

1 — 1 

•H  ® 

a 

cd 

a 

> 

G 

o 

o 

cd  Td 

a 

« 

^ 

-P 

® 

•H 

03 

?-• 

Ph 


TT 

•H 

O 

cd 

•p 

• 

u 

c4 

to 

'O 

’• 

St 

cd 

(d 

G 

CO 

o 

E-< 

r-i 

to 

cd 

o 

00 

CG 

-P 

vD 

•r 

® 

• 

CQ 

G 

m 

cd 

to 

00 

-P 

03 

® 

« 

02 

rH 

G 

02 

cd 

t,l 

CO 

to 

G G 
H O 

r>H  s 

03  ca 
> <0 
rH 
it  cd 
£ h CO 


> 

o 

u 

Q, 

a 

oj 


• ® 

CT>  to 
iH  ri 

a 


o 

3 

• 

G 

G 

a 

^to 

rH 

03 

cd 

® 

P> 

a> 

Cm 

CO 

c 

o 

03 

•H 

O 

-p 

-P 

a 

a 

o 

«n 

a 

o 

-p 

G 

2 

to 

Cu 

; 

•p 

CD 

CO 

•r*i 

CO 

1 — 1 

CO 

cd 

•< 

a 

03 

St 

§ 

to 

-p 

03 

CO 

•H 

® 

02 

1 — 1 

CO 

cd 

< 

a 

03 

(i 

G3 

to 

cd 

G 

■cd  - 


St 

a 


C'i 

bO 

G 

•H 

03 

-P 

> 

•O 


- t3 
-J  G 
•H  td 
> St 

r:  a 
c 

( — i 

^ 'H 

03  Cd 

B 

o o 

iH 

o ?> 

k ^ 

u 

-1_>  tt> 
S w 
b 

« -P 

0>  03 

cd  fc: 
3 03 
o 


cd 

o 

to 

o 

G 

cj 

o 

O 

G 

a 

a 

3 

a 

a 

a 

a 

•iH 

o 

1 

: cd 

i+^ 

§ 

1 

® 

G 

i 

! 

i ffj 

1 

a 

i 

a 

CCJ 

Board  of  Directors 


-p 

<u 

'CJ 

•H 

m 

Q> 

U 

0- 


o 

•rl 

03 

bO 

cd‘ 

t-, 

o5 

(J 

01 

03 

•ri 

Cm 

© 

o 

02 

S 

d 

CD 

© 

CO 

o 

to 

•p 

CO 

O 

d 

© 

Sh 

S3 

d 

© 

ert 

o 

1 

C/0  -P 

5s* 

• 

03 

© 

53 

<D 

to 

o 

u 

Ji 

•H 

c3 

*. 

>»  © 

© 

1 

Cu 

03 

© 

o 

© 

C3 

© 

d 

O 

O 

•a 

o 

© 

o 

04 

TJ 

-ri 

Si 

cd 

>> 

o 

d 

o 

•r-i 

o 

© 

d 

d 

-p 

d 

a: 

m 

«! 

o 

cn 

il. 

• 

© 

03 

03 

© u 

o 

0> 

to  C 

to 

•H 

5h 

^ d 

s 

© 

-P 

03 

CU, 

d S3 

•H 

© 

© 

t 

43  -H 

-p 

•H 

0> 

O <»-i 

*rH 

o 

-p 

o 

Xi 

O 

d 

•H 

<3  «M 

d 

© 

P 

•H  O 

C3 

c/3 

O 

Retail  Store  Management  Problems,  David,  p.  713. 

Same  as  District  Superintendent  I'o . 2. 

Same  as  Superintendent  under  District  Superintendent  No.  2.  Each  Superintendent  oversees  from  15  to  25  stores. 


^ ^ ' Cm  I ^ 


I?^ 


I'. 


r 


?■' 


.*i-  [• 


. ' 1 1, 

: i 

. . 1 


.i- 

n. 


4 I - 


: 'iAitii^i'l 


A k ^ * 


X 


■r>‘'  ?■ 

- . >•  I 

■>  } ' 


rm 

rv 


p-  i 


^v3« 


■!,.( 


% ■ 

; .♦ 


V , 


t , > ) ■.  1 


^ , ' 

> t,"-^  ^ 1 

. 

- 

> .;  n‘  ' ^ i 

*’  • .•■•'V 

» V ■ **  ' 

iti 

' * nk 

' 4.  ■'  {, 

K' 

!•’ 

» •? 

■ ' ‘,  1 1 t > 

1 u , , 

i'-l'  r,i'  ,. 

• '> 

'Z 

i' 

<i  { ' 

' ■ ■'! 

u , I> 

' ■ ^• 

* 

'-  '■  -'V  » '■ 

• • *' 

*X-  ■ f 

.< 

' < '.  j 

i 1 !•  . 

V ■ ' ■ I . '/  'v(  ■« 

• 1 ' 


: j 


'*1^ 


■^f;  ' f 

J 


CTl^TSR  II 

Ylhen  Hurd  and  Zimmerman,  investigators  for  Printers'  Ink,  made  their 
report  on  chain  stores,  (1914)  they  erni;hasized  the  jiower  which  large  capital- 
ization gives  to  such  organizations.  Since  that  time  this  Importance  has  be- 
come even  greater.  Chain  stores  now,  more  than  ever,  fall  under  the  class  of 
’^big  business,"  as  is  seen  by  the  self-explanatory  table  on  the  follo;ving  page. 

Since  financing  is  properly  included  ajKong  the  various  functions 
of  cnain  soores,  and  since  it  is  so  much  emjjhasized  by  investigators,  it  might 
be  v/ell  here  to  inquire  into  the  methods  used.^ 

The  first  of  these  methods  has  to  do  with  the  reinvesting  of  surplus 
earnings.  Practically  all  chain  systems,  especially  those  starting  as  individ\ial 
proprietorships  or  partnerships,  hxave  used  this  basic  method  of  financing.  The 
fundamental  factors  in  this  method  are  those  of  setting  aside  a certain  part  of 
the  net  earnings  each  year  into  v/hat  might  be  termed  an  "expansion  fxmid,  " and 
building  or  acquiring  new  stores  as  fast  as  is  justified  by  the  size  of  the 
fund.  One  of  the  best  examples  of  this  type  of  financing  is  contained  in  an 
analysis  of  the  S.  S.  ICresge  Company  Pive  and  Ten  Cent  Stores. ^ Spealcing  of  the 
financial  history  of  the  company,  the  statement  is  made;  "...  Betv/een  1897  and 
tne  date  of  its  incorporation  in  1912,  the  coi'pany  extended  its  chain  of  stores 
solely  through  the  reinvestment  of  s’orplus  profits,  adding  only  the  nuraber  of 
stores  which  net  profits  from,  the  preceding  years  justified...."  The  same  is 

1 As  linder  Organization,  it  is  very  difficult  directly  to  learn  v/hat  are  the 
methods  of  the  various  chain  systemis.  In  the  preparation  of  this  section  it 
nas  been  necessary  to  gather  most  of  the  material  indirectly  through  the 
various  financial  services  and  financial  papers.  There  has  been  no  attempt 
to  rr^ake  a complete  analysis  of  the  whole  field,  for,  as  the  reader  will  real- 
ize as  he  precedes  further  into  the  chapter,  it  would  involve  many  scores  of 
pages  and  the  results  would  not  be  commensurate  with  the  effort  required. 
However,  the  m.aterial  reported  on  is  sufficiently  representative  so  that  from, 
it  may  be  deduced  the  fact  that  there  are  two  general  methods  of  financing. 

2 George  H.  Burr  and  Company,  Investment  Bankers,  Hew  York,  April,  1922. 


■H 

C3( 

CT>i 

iH; 


Ctfl 

LOJ 


Oi 

S'.’ 

CVJ 

C\J 

N 

o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

G 

o 

o 

c 

o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

•* 

•* 

•» 

«« 

«« 

o 

u> 

o 

o 

o 

o 

o 

o 

o 

o 

o 

<• 

o 

o 

o 

o 

o 

o 

o 

o 

CO 

o 

o 

iTJ 

o 

o 

iCi 

o 

o 

•* 

H 

•* 

•» 

**■ 

*» 

VD 

OI 

o 

CO 

00 

o 

rH 

iD 

CO 

m 

CJ 

1 — 1 

1 — { 

C\2 

m 

X> 

o 

w 

Ui 

M 


o 

o 

o 

c 

o 

o 

c 

o 

o 

o 

o 

o 

o 

o 

o 

t- 

o 

o 

o 

o 

• 

o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

T3 

•* 

»* 

«• 

•* 

•» 

•» 

•k 

o 

o 

o 

o 

o 

o> 

m 

Cr- 

o 

ix, 

o 

o 

o 

c 

o 

■UO 

o 

VO 

CO 

o 

o 

c- 

C2 

in 

*% 

rH 

o 

I — ! 

to 

o 

t> 

CO 

to 

CN2 

o 

o 

rH 

t/2; 

WI 

CO 

ei 

^‘s 


O; 

mI 


£-^ 

M 

Oh 

Oj 

> 

gi 

COj 

ai 


Aj 

Oi 

-H| 

coj 

'^1 

-Pi 

•H  r 

pj 

cS! 

O! 


o 

o 

o 

m 

o 

o 

o 

o 

o 

c 

o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

♦ 

ev3 

o 

o 

o 

o 

o 

o 

o 

o 

a 

o 

1 — 1 

VD 

c\l 

m 

o 

CO 

o 

o 

CO 

c 

o 

o 

CQ 

VO 

c 

CO 

o 

to 

G 

o 

l-l 

to 

r-< 

o 

VO 

o 

'=i’ 

CO 

o 

•* 

•* 

•* 

to 

CO 

o 

C5^ 

to 

to 

cc> 

m 

r-J 

ec 

VO 

<o> 

o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

• 

o 

o 

o 

o 

o 

o 

o 

c 

o 

G 

-CJ 

o 

o 

o 

o 

c 

o 

o 

o 

o 

o 

•» 

•* 

•t 

•« 

cu 

o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

c 

o 

o 

o 

m 

o 

o 

o 

c 

o 

c 

m 

o 

o 

m 

o 

o 

H 

«« 

•» 

•» 

in 

o 

in 

CV2 

o 

o 

1 — 1 

m 

lO 

o 

i — 1 

r— i 

CO 

r-l 

r-l 

•O 

0) 

•H 

O 

-P 

<r; 


o 

o 


Si 


5 


o 

o 

o 

0 

0 

0 

0 

0 

0 

0 

o 

o 

c 

0 

0 

0 

0 

0 

0 

0 

o 

o 

o 

0 

0 

0 

0 

0 

0 

0 

•t 

«« 

•• 

o 

o 

o 

m 

0 

0 

0 

0 

0 

c" 

o 

o 

o 

0 

0 

0 

0 

0 

0 

o 

o 

o 

0 

c 

0 

m 

0 

0 

•* 

•* 

•\ 

0* 

o 

ir^ 

o 

m 

0 

t- 

•sjt 

CO 

0 

ca 

to 

CO 

r — i 

s 

0 

( — 1 

bO 

• 

• 

m 

0 

•H 

© 

0 

• 

G 

p 

K 

0 

p. 

oj 

• 

iH 

© 

p 

© 

CQ 

0 

(rf 

t-4 

cS 

0 

0 

G 

> 

• 

• 

o 

© 

0 

0 

o 

o 

4.1 

£-i 

« 

-p 

CO 

g~; 

o 

o 

00 

0 

to 

© 

+> 

©“ 

• 

0 

© 

u 

p 

5h 

Ph 

a> 

>> 

p 

cu 

« 

Sh 

ccJ 

0 

0 

to 

(U 

cci 

to 

C3 

0 

1 — i 

0 

0 

w 

c 

tb 

oa 

p 

-p 

-p 

to 

0 

rH 

c 

(D 

s; 

•H 

Sh 

-rl 

CO 

3 

p 

0 

u 

(D 

0 

• 

0 

r— 1 

0 

G 

© 

Ph 

■< 

0 

5>» 

0 

© • 

-C} 

•0 

p. 

u 

»H 

Sh  0 

• 

• 

a; 

-p 

© 

0 

0 

• 

© 

• 

(rf  C'3 

CO 

G 

-p 

cli 

-p 

u 

tC' 

,0;  cy> 

*r-l 

© 

•H 

-p 

0 

0 

CO  I-H 

• 

• 

u 

c 

0 

0 

• 

p 

• 

CO 

s 

0 

VH  C\2 


I 


trae  of  the  Kroger  Grocery  and  Baking  Corajitmy  of  Cincinnati.  Between  1884  and 
the  date  of  its  incorporation,  1S02,  the  only  outside  capital  injected  into  the 
Business  was  when  Kroger  took  in  a partner  (1884)  with  $350.^  This  method  was 
also  used  By  the  Great  Atlantic  and  Pacific  Tea  Company  from  1859  to  1901.  Until 
recently  the  entire  issued  stock  was  held  By  interests  identified  with  the  com- 
panj'’.  In  the  last  few  years,  however,  it  has  Been  necessary  for  the  company  to 

p 

seek  outside  capital  to  the  extent  of  one-half  its  outstanding  preferred  stock. 
The  W.  T.  Grant  Comijany,  1^  to  $1  Department  Stores,  operated  on  its  ov/n  capital 
from  the  start,  1900,  to  three  years  after  its  incorporation  in  1901. ^ The 
five  largest  Philadelphia  chain  grocery  systems  have  recently  comBined  to  form 
the  American  Stores  Company . These  are  the  Acrae  Toa  Con;pany,  The  Bell  Company, 
RoBinson  and  Crawford,  George  M.  Dunlap  Company,  and  the  Childs  Grocery  Corripany. 
Kot  one  of  the  companies  has  had  to  Borrow  a dollar  for  extension  or  improve- 
ments.  Today  we  see  raany  chains  springing  up  here  and  there,  organized  along 
corporate  lines  and  depending  largely  upon  syndicates.  Banks,  and  even  the  gen- 
eral puBlic  for  their  capital.  But  conditions  aro-*and  the  latter  part  of  the 
nineteenth  century  were  quite  different.  This  difference  is  pointed  out  in  an 
article  published  in  Printers'  Ink,^  which  states  that  time  was  when  Bankers 
were  rather  unenthusiastic  over  chain  store  financing.  Railroad  earnings  could 
Be  computed  and  industrial  undertakings  had  something  substantial  luider  th.em. 

But  new  commercial  ventures  like  chain  stores  depended  more  than  either  of  the 
classes  upon  personal  ability,  quick  turnovers,  anticipation  of  popular  tastes, 
3.nd  fashions.  A single  mistake  in  B'oying  might  ruin  a chain.  For  these  reasons 
Bankers  preceded  with  caution  whenever  the  financing  of  chains  was  concerned. 

1 McClures,  January,  1914,  p.lOS. 

2 Moody's  Manual,  1916-1921. 

3 Interview  with  Mr.  Brady,  Inspector  for  the  Company. 

4 Chain  Stores  and  the  High  Cost  of  Living,  Garnault  Agassiz,  p.  17. 

5 October  29,  1914,  p.  80. 


23 

The  second  ir^ethod  is  closely  allied  with  the  method  treated  in  that 
it  is  a combination  of  reinvesting  sxu*2->lus  earnings  and  outside  capital.  This 
method  has  three  separate  aspects: 

(1)  Taking  in  partners  who  can  make  an  investment; 

(2)  Borrovdng  from  banks;  and 

(3)  Selling  stocks  and  bonds. 

The  first  aspect  has  already  been  referred  to  above  in  the  discussion 
of  the  ICrcger  C5-rocerj’’  and  Bailing  Conpany.  Some  other  corrpanies  which  have  used 
this  method  are:  F,  IV.  Woolworth  Company,  W.  T.  Grant  Company,  and  the  J.  C. 

Penney Companj'.  In  the  case  of  the  J.  C.  Penney  Company  this  method  varies  to 
the  extent  that  if  a partner  has  not  sufficient  money  to  make  the  investment  it 
is-  loaned  to  him  by  the  compariy  with  the  condition  that  it  is  to  be  paid  back 
out  of  the  net  earnings  of  his  store.  The  Continental  Grocery  Stores,  Inc., 
requires  each  mianager  of  its  100  stores  to  parchase  stock  to  the  amount  of 
$1,000.  However,  this  is  not  prirr.arily  for  the  purpose  of  getting  outside  cap- 
ital, but  rather  to  bind  the  managers  more  closely  to  the  system. 

That  the  second  aspect  of  this  method  is  of  less  imrjortance  than  it 
was  forraerly,  was  intimated  by  the  stateraent  that  bankers  were  rather  'onenthusias- 
tic  about  chain  store  financing.  There  is  no  doubt  that  at  least  the  larger 
chain  systeias  could  get  bank  loans  much  more  easily  today  than  a fev/  decades 
ago.  This  is,  of  course,  due  to  the  fact  that  they  have  established  theK:selves 
more  firmly  not  as  "f ly-by-night"  ventures  but  as  responsible  business  units. 

As  a matter  of  fact,  these  orgaiiizations  are  rarely  short  of  working  capital,  as 
may  be  seen  from  the  data  on  the  following  page  selected  at  random  from  Moody's 
Manual  for  1921. 

The  third  and  most  important  method  of  getting  capital  is  that  of 


selling  stocks  and  bonds,  primiarily  stock. 


Stock  is  disposed  of  in  four  ways, 


24 


CJS 

cr>i 

3 

I 

U2l 

<D] 

COJ 


o 

o 

o 

rH 


CQ 


a> 

*§> 


o 

o 

o 

o 

o 

o 

r*^ 


o 

o 

o 

o 

o 

CV3 


o 

o 

o 

t- 

<o 

<y> 


o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

o 

•• 

«s 

m, 

«D 

o 

to 

o 

o 

o 

o 

-i* 

o 

c~ 

o 

00 

o 

o 

•• 

*« 

o 

C\I 

o 

iH 

lT> 

lO 

00 

col 

Wi 


COj 

oi 

Oi 

E^i 

COi 

g 

“i 

oJ 

ll 

o] 

Mi 

Oi 


+*! 

•ri* 

CQ-. 

bC 

•ri 

O 


fci 

o| 

Si 

s 

^'1 

■sdj 

CJ; 

p; 

tj! 

s 

co_ 

wt 

ffi 


ua 

Cj 

H-Jj 

Wj 

-P 

:3! 

‘-'1 

ot 

o! 

coj 

o| 


o> 

in 

o 

O 

o 

CO 

lT> 

o 

to 

c- 

o 

•• 

•• 

«« 

o 

CO 

CO 

o 

CO 

c- 

Q 

CO 

M 

00 

C3 

♦* 

•% 

•% 

0% 

iH 

'it 

o 

CN2 

o 

o 

00  pfd 
common 
slue 

tn 

o 

o 

o 

o 

c > 

•* 

•k 

-o 

t> 

in 

o 

o o 

o 

o 

CO  O oi 

CO 

<T» 

c 

cnj 

•* 

•^o 

tn 

o 

^ in  o 

I — 1 

rH 

rri  CVJ  S 

o 

O 

to 

1 — 1 

o 

o 

to 

c- 

to 

o 

o 

CO 

iH 

m 

o 

0% 

in 

ti* 

o 

00 

Ol 

CO 

rH 

c- 

00 

rH 

M 

o 

1 — i 

o 

ti* 

to 

00 

00 

o 

CM 

o 

o 

o 

O 

o 

o 

o 

o 

O 

o 

o 

o 

o 

o 

o 

•» 

•• 

•« 

o 

f—i 

to 

CM 

O 

CM 

o 

CM 

to 

o 

o 

iH 

CO 

to 

o 

»* 

n 

•% 

•k 

m 

CD 

to 

iH 

m 

rH 

CO 

c- 

o! 


o 

-p 


in  w 

P >> 

0} 

© -p 

C 

$-1  © 

to  o 

O -ri 

-p  -p 

p 

•H  CO 

CO  ai 

1 — 1 

> 

o p 

Pi  S 

O 0} 

o • 

Jh  O 

in  Pi 

P 

CO 

©o 

o o 

X-m 

S4  o 

• 

t)  o 

CO 

•H  CO 

P 

•e!) 

S3  CS 

C!i  © 

rH  B-< 

o 

• 

P 

Q 

o 

-t:  o 

o 

p 

• 

P «M 

1-3 

© 

Ci  *ri 

o 

© o 

• 

s 

Si  tsJ 

CO 

ci  Pi 

• 

© 

p 

© 

m 

Si 

•JiS 

• 

Pi 

o 

o 

o 

© 

p 

M 

o 

CO 

5-« 

«a 

© 

© 

>» 

Si 

o 

to 

© 

0^ 

m w 

o • 

s: 

to 

© 

Si  o 

© 

c 

^ fi 

CO  O 

Si 

© 

CO 

O 

0i 

Si  P 

Si  tiO 

© 

•o 

O CO 

• 

• © 

© 

liC  *H 

CO 

o Si 

p 

rri  P 

O 

o 

•H 

O S3 

Si  ci 

9 

• p 

S3 

O © 

s m 

CO 

M CO 

:=) 

•S:  CO 

United  Drug  Co • 45,000,000  8,839,570  68,500,000 

( Rexall  Stores) 


t 


\ 


I 


I.  * 


L • 


X.  I 


0:eY  AND  Lo  TO 
rO;  K:'.  i'Un^;rJD  TO  THE 
ClkCULAriON  Di'.SK  B-  HTE 
C LODI  No  H>jUu  LACr!  DAT 


hijliAse  Do  not  leave  this 

lilii^DIu  IN  A UAiEtEL  OVERNIGHT 
OH  fAi\r.  IT  OUT  OH  i’Ho  BUILDING 


25 


throoTcgh, 

(1)  Sliareholders ; 

(2)  Employes; 

(3)  Bankers  or  syndicates;  and 

(4)  The  general  public. 

Probably  all  chain  stores  give  to  their  shareholders  and  employes  the 
first  chance  to  subscribe  to  new  issues  of  stock.  In  some  of  the  systems  in- 
vestigated employes  were  pem:itted  to  bioy  stock  on  the  installment  plan  at  prices 
considerably  below  the  r.;arket. 

Perhaps  the  most  common  method  of  floating  issues  of  stock  is  through 
bankers  or  dealers  in  stocks  and  bonds.  Bankers  and  financial  houses  often  be- 
C0E;e  interested  in  the  chains,  sometimes  even  to  the  extent  of  interlocking 
directorates.  There  are  tv/o  bankers  in  the  board  of  directors  of  the  Woolworth 
Company.  Often  stock  and  bond  houses  become  attracted  to  the  chains  and  special- 
ize in  their  stocks,  as  for  exaiaple,  George  H,  Biur  and  Company/,  also  Merrill, 
L^^lch  and  Company  handling  Kresge  stock,  and  M.  L.  Meyer  and  Company,  Inc.,  In- 
vestment Bankers,  handling  that  of  the  Cox  Cash  (Grocery)  Stores. 

Another  plan  is  to  sell  the  stock  in  small  blocks  to  the  public.  Thus 
the  United  Drug  Comp'any  raises  money  by  selling  stock  to  druggists.  The  American 
Drug  Syndicate  sells  its  stock  to  iroggists  and  physicians,  in  this  way  gaining 
the  good  will  of  many  physicians.  The  Owl  Drug  Company  scatters  its  stock 
broadly  in  small  lots.  The  Continental  Grocery  Stores,  Inc.,  has  sold  small 
lots  of  stock  to  over  4,000  families.  Printers’  Ixik^  suggests  that  the  reason 
for  distributing  stock  broadly  and  in  small  lots  is  to  make  it  appear  as  thcji^ 
the  chains  are  not  embodiments  of  ”big  business.”  I'liile  this  may  have  been  the 


1 November  5,  1S14,  p.  64. 


iTiotivating  force  some  decade  or  two  ago,  today  chains  generally  will  adri'it  that 
they  are  arixioas  to  secure  as  maroy  "share -hoi ding  boosters"  as  possible  in  the 
neighborhoods  where  their  stores  are  located. 

Nothing  has  been  said  about  the  part  played  by  bonds  in  the  financing 
of  these  enterprises.  Not  raich  can  be  said  except  that  preferred  stock  takes 
the  place  of  bonds  in  niost  cases.  Chain  stores  with  outstanding  bond  issues  are 
rare.  Occasionally  some  chains  float  bond  issues  when  they  need  capital  for  ex- 
pansion. In  1316  and  1917  the  Great  Atlantic  and  Pacific  Tea  Company  issued 
five-year  gold  notes  to  the  extent  of  ahr.ost  $5,000,000  "to  provide  f'onds  for 
the  establishment  of  nev/  stores  in  sections  of  the  country  hitherto  uncovered."^ 

Prom  what  has  been  said  it  may  be  concluded  that  the  general  tendency 
is  for  a chain  to  finance  itself  first  by  reinvesting  s-o.rplus  earnings;  but  after 
it  has  reached  a certain  limit  in  size  outside  capital  is  necessary.  The  outside 
cajjital  comes  into  the  business  at  time  of  incorporation  and  recapitalization. 


1 Hoody’s  Manual,  1916. 


27 


CE/\PTER  III 

Periods  of  readjustment  in  "business  are  accompanied  by  a realization 
on  the  part  of  merchants  and  manufacturers  of  the  necessity  of  iriiproving  busi- 
ness methods.  It  might  be  stated,  parenthetically,  that  this  statement  does  not 
apply  so  rmach  in  the  case  of  chain  stores  for,  as  is  generall3’-  conceded,  their 
methods  are  very,  efficient . Aside  from  the  fact  that  selection  of  sites  is  one 
of  the  most  important  functions  of  a chain  organization,  there  are  two  justifi- 
cations for  a treatment  of  this  subject  here,  /in  the  first  place,  the  amaant 
of  rent  paid  for  a site  usually  varies  directly  with  the  value  of  that  site  for 
any  particular  business./  The  implication  hers  is  that  a man  cannot  afford  to 
pay  a proportionately  higher  rent  ’unless  he  can  correspondingly  increase  his 
sales  or  cut  down  some  other  item  of  expense.  In  other  words,  the  business  man 
is  (or  sho'old  be)  paying  special  attention  to  his  expense  budget  in  this  period. 
Since  rent  ranks  second  only  to  salaries  in  practically  all  types  of  bu.siness, 
it  is  evident  that  a study  of  the  relation  of  rent  to  sales  is  necessary  at  this 
t ime . 

/in  the  second  place,  since  chain  stores  use  efficient  r-ethods  in 
selecting  sites  it  may  be  inferred  that  a study  of  these  methods  should  prove 
profitable  to  a merchant,  v/hether  or  not  he  expects  to  expand,  or  to  the  pros- 
pective merchant. I It  is  probabl2/  true  that  every  merchant  makes  some  sort  of  a 
business  analysis  before  he  locates  his  store  - even  a newsboy  does  this  v/hen 
he  locates  his  stand;  but  how  scientific  these  analyses  are  is  a different  ques- 
tion. 

Charles  C.  ilicholls,  Jr.,  President  of  the  Chain  Stores  Leasing  Company, 
and  one  of  the  foremost  authorities  in  the  United  States  on  the  selection  of 
sites  for  chain  stores,  sets  forth  several  principles  to  be  talcen  into  considera- 
tion in  selecting  retail  chain  store  sites. ^ 


1 Retail  Ledger,  Second  November  Issue,  1921,  p.  6. 


28 


/>-I.  Ascertain  the  population  of  the  tov/n  or  district 

••2.  Deterii:ine  the  character  of  the  people 

l-3.  Investigate  the  main  industries  to  see  whether  the  location  is 
good  for  men  or  women 

4.  Analyce  hank  clearings 

5.  Find  out  how  manv  different  kinds  of  industries  there  are  and 
detem:ine  the  proportion  of  employers  to  employes. 

In  the  same  article  Mr.  Nicholls  points  out  that  chain  stores  analyze 
more  carefully  than  any  other  organizations  this  problem  of  selecting  sites.  A 
summary  of  some  of  the  specific  principles  considered  hy  Mr.  Nicholls  is  given 
here : 

1.  Close  attention  to  the  physical  condition  of  the  buildings,  the 
street  level,  location  of  windows  and  doors,  the  height  of  ceil- 
ings, the  size  of  the  posts  and  whether  or  not  the  buildings  have 
available  baseiiiGnts,  These  are  necessary  in  the  case  of  the  five 
and  ten  cent  stores,  department  stores,  and  some  others. 

2.  Women  v/ill  walk  to  a basement  more  readily  than  they  will  take  an 
elevator,  or  clirub  a flight  of  stairs,  especially  if  they  can 
catch  sight  of  the  merchandise  dov/nstairs. 

3.  Men  will  v/alk  up  one  flight  of  stairs  to  save  money.  However, 
the  increased  amoimt  of  advertising  necessary  makes  it  doubtful 
whether  second-floor  locations  are  more  econonucal  in  the  long 
run. 

4.  The  traveling  population  may  be  analyzed  into  three  distinct  types. 
The  first  of  these  is  the  class  of  people  which  comes  prepared  to 


buy.  The  second,  or  "drop-in"  type,  is  comi^osed  of  transients. 
Drug  and  cigar  stores  are  the  only  ones  that  can  reasonably  expect 


39 

some  of  this  trade,  "Station- traffic"  consists  of  commuters; 
they  can  rarely  be  expected  to  purchase. 

5.  Undesirable  locations  can  often  be  detected  by  watching  carefully 
the  advertising  of  local  merchants,  noting  what  part  is  that  of 
the  merchant  who  must  coax  people  to  come  to  his  store. 

6.  Different  classes  of  people  freq’aent  different  blocks.  One  block 
may  be  favorable  for  the  sale  of  high-priced  goods,  while  in 
another  nothing  but  cheap  goods  can  be  sold.  Likewise,  some  blocks 
are  given  over  exclusively  to  women's  trade. 

7.  The  shady  side  of  the  street  is  usually  the  women's  side,  and 
rents  are  about  35  per  cent  higher.  Notable  exceptions  are 
Tremont  Street,  Boston;  and  iv'iain  Street,  Rochester,  where  the  de- 
partment stores  started  on  the  sunny  side  in  the  first  place  and 
drew  trade  across  the  street. 

8.  Chain  stores  look  for  a location  near  another  store  in  the  saK.e 

line.  This  is  especially  true  in  the  case  of  five  and  ten  cent 

/ 

stores.  Ex^ptions  are  Scruggs,  Vandervoort  and  Barney,  of  St. 
Louis,  who  moved  to  Tenth  and  Olive  Streets,  two  blocks  from  any 
other  retail  stores;  also  Sanger  Brothers,  of  Dallas,  Texas,  who 
went  from  the  main  business  district  and  drew  other  stores  to 
their  neighborhood. 

9.  Cigar  and  drug  stores  nmst  locate  near  a heavy  traffic  point.  A 
cigar  store  can  rarely  pay  expenses  unless  it  is  on  the  corner. 

Drug  stores  can  often  use  an  inside  location  if  they  are  not  more 
than  a few  feet  from  the  heavy  traffic  highway, 

10.  In  general,  advertising  merchants  can  afford  to  take  a chance  on 

location.  Non-advertisers  must  anticipate  where  traffic  is 
going  to  center  during  the  whole  term  of  their  lease. 


30 


I/Iention  has  already  been  made  of  the  important  relationship  which 
exists  between  the  arfto’ont  of  rent  paid  and  net  sales.  Practically  all  the  larger 
chain  systems  have  given  this  relationship  a manerical  correlate.  Charles 
Nicholls,  Jr.,  gives  the  following  average  per  centages  of  net  sales  which 
chains  in  various  lines  can  afford  to  pay  for  rent.^ 

him  i of  Sales 

Shoe  Stores g 

Department  Stores  3 


Specialty  Shops  (lion-advertising) 8 

5 and  10  Cent  Stores  (lion- advertising)  ...  5 

Drug  Stores 10 

Candy  Shops 10 

Pruit  Stores 10 

Grocery  Stores  10 

Cigar  Stores 6-8 

Barber  Shops  12 

Clothing  Stores  5 

Restaurants  and  Cafeterias  (keepiing  open 

long  hours) 6 -12 


That  the  work  of  selecting  sites  has  been  spiecialized  to  a high 
degree  has  already  been  inferred.  Four  general  methods  of  handling  the  problem 
are  taken  up  in  the  order  of  their  increasing  specialization.  Locating  and 
renting  is  done  by: 

1.  Some  member  of  the  firm, 

2.  Real  Estate  department, 

3.  Subsidiary  corporations,  or 

4.  Independent  leasing  companies. 


'F: 


^ 1, 


1*V 


t 


i 


I 


Li- 


31 


The  first  r^thod  is  con'ir;:On  to  srriall  chain  systems.  It  is  the  first 
evidence  of  specialization  and  api:lication  of  the  principles  of  scientific 
managerr.ent  which  pertain  to  standardization.  Some  merr:ber  of  the  firm,  because 
of  his  aptitude,  is  chosen  to  look  for  new  locations.  In  some  cases  he  may  de- 
vote only  a part  of  his  time  to  the  matter;  but  as  the  chain  of  stores  extends 
itself  he  is  reoprdred  to  give  more  of  his  time.  Next  it  logically  follows  that 
he  may  train  one  or  more  assistants  to  take  care  of  the  grov/ing  volurae  of  de- 
tails. At  this  point  comes  the  transition  to  the  second  method. 

Separate  real  estate  dei;artruents  are  organized  for  effecting  econ- 
omies in  time  and  money.  In  fact,  this  is  the  essence  of  specialization.  Kov/- 
ever,  expansion  of  the  chain  likewise  carries  v/ith  it  the  impilication  referred 
to  in  the  first  method, viz.,  that  the  work  can  be  performed  more  economically 
by  means  of  further  specialization. 

The  third  and  fourth  methods  are  more  or  less  interrelated  in  that 
the  evolution  under  discussion  may  include  either,  but  not  both,  of  the  two. 
Ilov/ever,  this  aspect  will  be  treated  under  the  policies  of  various  tj’pical  chair- 
organizations  and  exaiiiples  given  of  subsidiary  realty  corporations  and  independ- 
ent leasing  companies. 

Chain  stores  us\\ally  try  to  obtain  long-term  leases  but  will  often 
buy  buildings  outright  in  order  to  get  desirable  locations.  The  Childs  Company 
(Restaurants)^  has  been  known  to  v/ait  as  long  as  five  years  to  get  a suitable 
location.  The  company  ovms  the  buildings  where  many  of  its  stores  are  located, 
as  for  example  the  site  at  194  Broadv;ay,  New  Yoi’k.  The  ground  is  assessed  at 
$925,000,  and  the  three-story  building  certainly  cost  not  less  than  $73,000, 
ifiaking  a total  investment  of  $1,000,000.  Interest  on  the  investment  is  $60,000. 


1 Printers'  Ink,  November  12,  1914,  p.  65. 


:S?igfarr*s!=;=^ 


32 


The  ajan^jial  gross  earnings  are  about  $600,000.  The  difference,  $540,000,  is  a 
large  one  out  of  which  to  talce  net  profits.  The  real  estate  subsidiary  of  the 
Guilds  CoiT'pany  "clocks"  and  analyzes  the  x-'®opls  passing  a certain  point  daily. 
Leases  run  from  21  to  99  years.  It  has  data  on  all  available  sites  in  the 
country. 

Kaufman  Brothers  (Nev/  York,  Hatters)  generally  go  where  rents  are 
nignest  because  they  feel  they  can  do  business  there.  In  fact,  increased  sales 
due  to  superior  locations  cut  their  operating  cost  to  about  20fb.^ 

Some  low-priced  grocery  cha,ins  select  sites  on  the  basis  of  their 
deliveries  in  certain  sections.  1/hen  deliveries  to  a certain  section  reach  a 
certain  point  a new  store  is  op'ened  there  and  the  driver  put  in  as  manager.  Ee 
tries  it  out  for  thirty  days  and  if  it  does  not  pay  the  store  is  closed  immed- 
iately.^ 

The  United  Cigar  Stores  of  America^  do  not  hesitate  to  open  a store 
directly  across  the  street  from  one  that  is  already  in  operation  if  the  traffic 
past  the  new  place  seems  to  warrant  it.  When  this  is  done  sales  never  fall  off 
in  the  first  store.  The  "clocking"  is  performed  by  ruen  from  the  United  Merchants 
Realty  and  Irmprovement  Company,  who  study  carefully  the  general  trend  of  traffic. 
They  also  estircate  the  hours  during  the  day  when  a certain  nximber  of  people  will 
pass  a given  spot,  and  they  study  such  local  conditions  as  proximity  to  manu- 
fact\iring  plants,  factories,  or  other  large  enterprises.  A condition  avoided 
in  opening  a store  is  that  of  raising  it  either  a step  above  or  below  the  street. 
Stores  are  floored  exactly  to  the  street  level.  Another  policy  is  that  of 
placing  the  entrance  to  one  side  so  that  the  center  of  the  store  can  be  seen 
and  easily  reached  from  the  street. 

1 Printers’  Ink,  November  12,  1914,  p.  85, 

2 Ibid,  p.  55. 

3 Adu.inistration,  l arch,  1921,  p.  229. 


33 


It  has  "been  said  that  the  realty  subsidiary  of  the  United  Cigar  Stores 
is  the  most  profitable  part  of  the  business.  The  only  information  available  is 
that  in  1913  it  paid  a $500  cash  dividend  on  its  $100,000  of  comion  stock. 

The  fourth  method  is  e;cer/;plified  by  the  Chain  Stores  Leasing  Company, 
of  which  Mr.  Charles  C.  Nicholls,  Jr.,  is  president.  This  company  handles  and 
advises  on  real  estate  all  over  the  country  for  a number  of  large  chain  systems, 
including  the  Schulte  Cigar  Company  (of  which  Mr.  Nicholls  is  vice-president), 
the  T.  Grant  Company,  the  Bond  Clothing  Company,  and  others.  This  company, 
which  has  offices  in  large  cities  all  over  the  co^mtrj'',  has  detailed  data  on 
hand  concerning  sites  for  all  sorts  of  businesses. 


1 Printers*  Irdc,  November  12,  1914,  p.  58. 


34 


lY. 

One  of  ths  irost  difficult  prol:lerr,s  with  which  chain  store  officials 
are  required  to  cope  is  the  selection  of  Hianagers.  It  is  practically  irupossilole 
to  find  ready-made  rnaiiagers  "because  of  the  complexity  of  the  worh,  and  hecaase 
such  men  can  ordinarily  make  more  money  by  opening  stores  for  themselves.  So, 
as  might  well  be  expected,  the  common  practice  is  to  train  employes  up  to  a point 
where  they  are  capable  of  taking  charge  of  a store,  lhat  this  method  of  makir.g 
managers  is  significant  of  the  high  degree  of  standardization  found  in  chain 
sp'-stems  will  be  brought  out  in  the  discussion  of  the  selection,  training,  and 
promotion  of  employes. 

In  all  systems  investigated  the  general  method  of  training  men  for 
maiiagers  was  the  same.  It  is  X-''s^i^'‘issible,  therefore,  to  treat  the  subject  rather 
generally  at  first  azid  later  shov/  l:cw  the  r.iethod  works  in  some  typical  chain  or- 
ganizations. 

It  is  characteristic  of  all  these  chains  that  the  prospjective 
manager  nxist  start  at  the  very  bottom,  which  is  usri.ally  the  stockroom.  At  first 
he  op-ens  boxes,  carries  stock,  acts  as  Janitor,  and  doss  odd  Jobs  of  all  sorts. 
Yliile  working  in  the  stockroom  he  learns  the  stock,  hov/  it  Is  packed,  what  assort- 
ments it  comes  in,  and  how  it  is  arranged.  After  some  time  - in  some  cases  two 
or  three  months,  and  in  others  a year  or  more  - he  receives  his  ne:ct  step)  in 
training, which  is  learning  how  to  display  goods.  Training  along  this  line  con- 
sists of  breaking  up  window  displays  a:id  learning  sorce  of  the  fundamental  prin- 
ciples of  window  trinniing.  At  this  time  he  becomes  either  a clerk  or  an  assistant 
manager.  P/hile  assistant  manager  he  acts  as  floorv/alkor , directing  people  to  and 
fro,  gats  change  for  clerks,  and  assists  the  clerks  dm’ing  rush  hours.  All  the 


35 


while  he  is  learning  the  paper  work,  window  trirrring,  interior  display,  which 
are  the  duties  of  a manager.  In  some  chains  the  manager  is  req'iired  to  do  most 
of  the  e.d'ncational  work,  b.it  in  the  majority  of  cases  printed  pamphlets,  hocks, 
and  even  complete  husiness  training  courses  are  prepared  "by  a sp'ecial  department 
of  the  orgaiiization  headed  hy  an  educational  director.  Vhien  the  assistant  manager 
is  thoroughly  trained,  and  this  is  usually  determined  hy  the  manager  and  inspector, 
he  is  ready  to  take  charge  of  one  of  the  smaller  stores.  After  demonstrating  his 
ability  in  the  small  store  he  is  given  a larger  one. 

In  the  ?.  Fcolv/orth  COnpaaiy^  the  method  is  practically  identical 
with  that  outlined  above.  Unless  a man  possesses  more  than  average  intelligence 
it  takes  him  about  three  years  to  become  an  assistant  manager.  Tlie  prospective 
manager  gets  educational  helps,  from  time  to  time,  in  the  form  of  manuals,  bocks 
and  pamphlets.  Ee  is  also  encouraged  to  re.ad  business  books  and  magazines.  Ills 
compensation  during  this  period  is  very  small.  Tl-ie  theory  is  that  if  a man  is 
paid  low  wages  he  will  work  harder  to  gain  proiiiotion.  In  one  to  tbjree  years,  de- 
pending on  his  ability,  he  becomes  a manager.  As  manager  he  gets  a nominal 
v/eekly  salary,  scarcely  large  enough  to  live  on.  Sut  he  is  compensated  in  addi- 
tion to  this  according  to  his  ability.  Each  manager  is  guaranteed  a certain 
salary.  In  addition  he  receives  a percentage  of  the  net  profits  of  his  store. 

Years  ago  this  contrdssion  was  49^,  later  it  v/as  reduced  to  35^,  and  now  it-  is 
said  to  be  S^.  It  is  said  that  a mianager  usually  earns  twice  his  guaranteed 
salary  after  the  first  year.  In  one  instance  last  year  a manager  of  one  of  the 
largest  stores  earned  over  025,OOC. 

• In  the  r.  1.  Grant  Compaioy^  the  method  is  sirrdlar  to  that  of  the 
voolwoi*th  cnain,  but  promotion  is  much  faster.  After  two  years  the  average  man 


1 Interview  with  local  manager. 

2 Interview  with  ’Ir.  Er<ady, ins^pector  for  the  ccoo-ai'iy. 


I 


1/  j 


4 . . ^ 1 


<v  't* 


t' 


i 


( 


t 


> 


.f  r 


..'4:^’ ir<  . ; ..'4^/ ' 


'A 


' 'l  *' 


:♦  ■'  * 


I I 


f 

■Av; 


• V-'>4 


■ ■ 


* ' ^ ' j ^ *TT  * 

/ f Jii  ^ J"  . Mif 


, .w'  • V 

„ vT-  h 


3u 


tecowea  a r.ianager  of  one  of  the  sr.alleot  stores,  after  having  passed  an  eigl'.t 
weeks'  edncational  course  at  the  Hew  York  office.  There  are  five  grades  of 
stores:  A,  E,  C,  E,  and  E,  A "being  the  "best  and  E the  poorest.  E^.e  new  inanagsr 

tal^es  charge  of  an  "S"  store  until  he  has  made  a "D"  store  of  it.  Tl.en  he  is 
pushed  up  to  a "D"  store,  etc.  After  managing  an  "A"  store  for  five  years  he  is 
ready  for  an  executive  position  on  the  staff. 

Tl'.e  method  of  the  Grant  chain  is  peculiar  in  that  the  r.anager  has 
charge  cf  the  education  of  all  his  errplcyes.  lie  gives  tallos  at  "banquets  held 
for  the  employes  once  a week.  It  is  interesting  to  note  that  four  phrenologists 
are  employed  "by  the  company  for  the  x'urpose  of  ascertaining  the  efficiency  of 
clei’ics.  It  is  dou"':tfrJ  whether  this  is  an  effective  test.^ 

The  principles  in  the  Penney  Corrpany  ■ method  are  practically  the 
same  as  in  the  other  methods  discu.ssed.  TI:at  there  is  a difference  in  the  working 
of  the  plan,  however,  is  s'.ov.Ti  "by  the  fact  that  last  yeai’  the  la’oor  turnover  was 
only  Prospective  managers  are  selected  with  great  care.  It  is  a policy  of 

the  co:iipa:'.y  never  to  hire  a nan  vvl'^o  s.okes  cigarets,  drinlos,  or  has  no  religious 
fa-ith.  The  educational  department,  under  a prondnent  educator,  has  worked  cut  a 
very  coniplete  "business  training  course  which  covers  all  phases  of  retailing  and 
store  nanagernent.  All  erployes  are  encouraged  to  talce  the  lessons,  which  are 
sent  to  the  main  office  a,s  completed.  I.Ianagers  are  j;aid  a s:i3all  salary  'beside 
their  dividends.  Clerks  receive  a salary  and  bonus  according  to  lengf':  of  ser- 
vice. 


T::e  partner-raanager  plan  of  promotion  is  one  of  the  clcaract eristics 
of  the  company.  Briefly,  the  plan  is  as  follows:  After  a nan  has  proved  his 

ability  he  is  mad.e  head  clerk  and  later  given  a try-out  store  to  m.anage.  If  he 

1 Stax’ch,  Educational  Psychology,  p.39. 

2 Interview  with  local  manager. 


K.akes  gccd  as  manager  of  the  try-oiit  store  h.e  hecomes  manager  of  a new  store, 
with  the  gnivilege  of  buying  a one-third  interest  in  it  with  monej'"  loaned  him  by 
the  company,  to  be  repaid  from  future  profits.  Tl:e  new  manager  i:^.-ediately  be- 
gins training  clerks  for  managers  of  new  stores,  blien  they  talce  charge  cf  stores 
the  manager  who  trained  them  receives  a one-third  interest  in  their  stores.  Tlie 
process  is  repeated  continually,  each  manager  receiving  a one-third  interest  in 
the  next  two  "generations"  of  stores,  i.  e.  , in  the  stores  of  the  maiiagers  he 
trained  and  in  the  stores  of  the  managers  trainedby  his  previous  clerks. 

In  conclusion,  attention  is  brouglit  to  the  fact  that  most  chain 
stores  do  not  make  any  spiecial  effort  to  educate  their  clerks.  Obviously/,  this 
is  due  to  the  high  degree  of  standardization  found  which  malces  it  possible  to 
employ  low-priced  sales  help. 


ClUFTED.  Y, 


Tlie  general  opinion  is  that  the  greatest  advantage  of  the  chain 
store  rests  in  its  ability  to  secra’e  quantity  prices.  T ere  is  no  doubt  that 
the  simple  principle  whereby  tv/o  stores  by  pooling  their  pnrchasos  are  able  to 
secure  lower  prices  exists  in  tho  case  of  the  chain  store,  Tlie  buying  advantage 
is  uore  eppai'ent  when  the  fact  is  considered  that  seme  chains  for  several 
hundreds,  or  even  thousands,  of  stores.  In  this  connection  it  is  wortlijo  to  note 
that  direct  buying  connections  are  made  possible  with  manufacturers.  P-arthermore , 
as  will  be  seen  later,  the  departmental  bn^rsrs  can  go  to  the  manufacturers  and 
buy  scientifically . 

Txie  charge  is  often  made  against  the  chains  that  because  of  their 
enormous  p’ur chasing  and  distributing  power  they  'ire  often  able  to  cornrrsnd  "in- 
side prices."  Tnese  "inside  prices"  taloe  various  forms,  the  -ost  conraon  of  which 
are  secret  discounts  in  addition  to  the  reg-oJar  quantity  discounts,  and  long 
datings  on  bins.  Vdiatever  iLsy  be  the  aavguments  for  or  against  quantity  prices, 
it  is  ce-.-tain  that  chain  stores  are  getting  the  benefit  of  them.  It  is  likewise 
true  thau  these  discounts  cannot  be  increased  indefinitely  as  the  quantity  in- 
creases, but  only  to  a point  where  the  law  of  increasing  returns  ceases  to  apnly. 

mere  are  four  sources  from  which  chain  stores  draw  their  suppolies: 

1.  Tl'e  "ccirimon"  source 

3.  Surp?lu3  stocks  of  manufacturers  and  jobbers 

3.  Controlled  output  of  factories  (usually  for  one  year,  but 
sometimes  for  only  two  or  three  months). 

4.  Output  of  acquirei  factories. 


I 


J. 


' 39 


I/lost  c’r^ain  systems  "bTiy  at  least  some  of  fieir  items  in  tlie  sa:..e 
way  the  individual  merchant  dees,  vis.,  "hy  criering  froi-i  various  manufacturers 
according  to  tlieir  needs.  T::.e  only  difference  is  that  the  chains  huy  in  larger 
quantities  and  consecraently  get  lower  nrices. 

Again,  like  fie  department  store  and  some  few  of  t'  e largest  re- 
tailers, f e chain  is  able  to  secure  the  surplus  stock  of  manufa-cturer s and 
jobbers  at  low  prices  for  cash.  Incidentally , it  might  be  added  that  a,ll  chain 
systems  investigated  sell  for  cash  and  are  consequently  able  to  buj'  for  casli. 

^inother  source  is  the  controlled  cut  put  of  factories.  Ilany 
chains  control  part  or  all  of  the  o’utput  of  marq-  factories,  llr.  V.  V.’oolworth 
is  reported  as  having  been  the  originator  of  this  nlan.  It  is  said  that  when  he 
approached  the  president  of  a manufacturing  concern  and  asloed  for  his  lowest 
cash  price  for  a yeai^'s  outp-ut  he  was  lau^ued  at.  Todaj”  all  of  the  chains  in- 
vestigated control  at  least  part  of  the  outwaf  6f  one  factory,  and  seme,  the 
United  Dri^g  Company  for  example,  control  the  entire  output  of  a dozen  or  more. 

Hie  fourth  method  has  evolved  naturally  from  the  third.  At  first 
the  out';.'ut  of  factories  v/as  controlled,  but  later  the  factories  were  acquired. 

In  many  cases  the  chains  have  bought  just  enough  stock  in  manufacturing  concerns 
to  acqfuire  control.  Hie  advantages  of  s’uch  an  arrangement  are  obvious. 

Perhaxis  one  of  the  outstanding  factors  in  the  success  of  c::ain 
store  buying  is  that  expert  buyers  are  able  to  forecast  market  trends  and  b-uy 
accordingly.  Hie  buyers  are  specialists.  In  some  cases  they  buy  only  one  partic- 
ular line,  such  as  shoes,  notions,  cotton  goods,  etc.  Another  advantage,  alre.ady 
referred  to,  is  that  each  buyer  Icriows  his  market  thoroughly  and  is  on  the  spot 
with  Ms  check  book  whenever  exceptionally  good  offers  are  male.  In  the  majority 
of  cases  these  b^uyers  have  been  stock  beys,  store  managers,  and  inspectors,  and 


41 


has  I'eached  the  prescx-ihed  nxinircuKi.  Such  actions,  however,  are  watched  very  care- 
f’j.ir.y  frorr.  the  district  office,  and  a reT^riinand  is  in  order  if  his  Judgroent 
proves  had.  If  the  store  'nanagor  has  a demand  for  an  article  which  the  'bu2/er 
cannot  readily  obtain,  he  may  purchase  the  article  locally.  Hov/ever,  sn:,ch  cases 
are  rare. 

■Warehouses  are  located  in  ITew  York  City,  Dallas,  and  San  Francisco. 
Fnese  are  used  merely  for  storing  articles  of  v.h.ich  there  is  a surplus  due  to 
t„e  fact  that  it  is  sometir.es  necessary  fcr  the  buyer  to  take  very  large  quanti- 
ties in  order  to  get  the  best  prices.  Ordinarily,  however,  drop  shipments  are 
made  from  the  factories  to  the  v.'arious  stores.  However,  when  stores  order  less 
than  case  lots  the  tra,ffic  men  at  the  warehouses  break  up  the  cases  and  send  to 
the  stores  the  quantity  desired.  Incidentally,  it  right  be  added  that  the 
Woolworth  chain  owns  no  factories  but  controls  the  entire  output  of  several,  and 
a large  part  of  many. 

Before  a buyer  closes  a contract  for  new  articles  he  sends  saigples 
to  tne  different  stores.  Each  o^anager  signs  up  for  the  quantity  he  believes  he 
will  be  able  to  sell.  The  orders  are  telegraphed  to  the  buyer,  and  he  closes 
the  deal. 

T-vice  a year,  and  sornetires  oftener,  the  buyer  makes  foreign  trips. 
One  Ox  0 — e so  ^rips  xs  to  C^lna  and  Capan,  and  the  other  covers  Surc''^G,  '"•r'^ncioal  — 
ly  Fr.ance  and  Oermary.  In  these  co-ontries  ha  visits  the  ex'-.ibitions  at  which 
the  prcnir.ent  manufacturers  displa^y  their  goods. 

lJuch  is  often  said  about  the  use  of  loss-leaders  in  chain  stores. 

-1.  t-.e  . ool^/ox^t—  Cxiain  there  is  a de^'^inite  policy  that  each  store  ro.anager  '..ust 
order  loss-leaders  to  the  extent  of  five  per  cant  of  his  last  vear's  sales. 


* ■.  \ 


■ • 
.-.-v 


\ 


ii* 


J. 


.i  Ic 


i 


lUi 


o‘ 


r ■ .'/■•>! 

't 


I «4 


• •r  < 


i •> 


J# 


: i ■■ 


1 '. 


•»a 


f ' ' 1 


'.V 


• ’!■ 


i .1 . . 


^2 


The  J.  C.  Penney  Conpany^  maintains  tliree  'o-uying  offices,  viz., 
hew  York  City,  St.  Lonis,  and  St.  Paul.  f'-S  'brying  force  consists  of  ahoiit 
twenty  hvyers.  Some  of  these  have  heen  trained  in  the  Penney  system  as  mariagers, 
but  many  come  from  retail  establishjnents,  mail  order  houses,  and  jobbing  concerns. 

It  should  be  stated  at  the  cutset  that  manager-partners  are  not 
required  to  buy  their  goods  of  the  J.  C.  Penney  Con^anj''.  It  is  rare,  however, 
to  find  a manager  who  doss  net  take  advantage  of  the  enorm;Ous  purchasing  power 
of  the  Penney  organization. 

riany  of  the  buyers  are  interested  in  the  stores,  since  the^^  have 
the  sane  opportunity  that  luanagers  have  to  acquire  an  interest.  Obviously 
there  is  an  advantage  in  such  an  arranger-ent . 

TliS  buyers  go  cut  into  the  market  and  malce  puurchases.  Pvery  day 
a printed  sheet  is  sent  to  each  of  the  stores  containing  a list  of  new  purchases 
and  the  s-rrulus  of  old  purchases.  T.iese  lists  contain  the  following  information: 

Pate 

ITarce  of  articles 

Op-a^tity  of  eac’’*  article 

At  what  warehouse  the  items  are  located,  or  if  at  the  manufactur- 
er's wareho*ase,  the  address  cf  manufacturer. 

Cost  price 

Suggested  sel.ling  price  (Most  stores  u.se'  the  suggested  price,  but 
vary  from  it  when  the  occasion  demands) . 

Puere  are,  in  addition  to  the  dans'-  lists  sent  cut  by  the  main 
office,  speci-al,  seasonal  lists,  which  are  sent  out  from  time  to  time. 


1 Interview  with  local  manager. 


43 


T:ia  store  Manager  malies  np  his  order  frora  his  record  of  previous 
sales  and  his  estimate  of  what  the  natural  increase  should  hs.  In  doing  this 
he  is  aided  hy  the  Daily  Report  which  he  sends  in  to  the  main  office.  Tl:is  sheet 
is  r«^led  non zont ally,  one  line  for  each  department,  and  has  four  vertical  rul- 
ings. Hie  four  vertical  spaces  are  ''-eaded  "Amount  G-oods  Purchased,"  "Amount 
C-oods  Received,"  "Amount  Goods  Transferred  to  Other  Stores,"  and  "Orders  Can- 
celled." At  the  hcttom  of  the  sheet  is  placed  the  aisount  cf  the  day's  sales  in 
e ach  dep ar tment . 

lh.e  order  is  sent  to  the  .main  office  (IJcw  Ycrh  City),  where  it  is 
approved  oy  the  Ilerchandise  Ilanager  before  it  is  passed  on  to  the  buyers.  Ship- 
ments are  always  made  in  case  lots  direct  from  the  factory,  store  managers  break- 
ing them  up  among  themselves. 

Hvice  a year.  Spring  and  Pall,  buying  conventions  are  held  at  ITew 
York  City,  St.  Louis,  Missouri,  Salt  Laice  City,  YtA:,  Portland,  Oregon,  and  St. 
Paul,  Miruiesot^  in  the  order  mentioned.  Tlien  the  convention  is  on  in  a certain 
city,  store  managers  from  that  partinular  district  get  together  and  order  their 
goods  from  tne  samples  laid  out.  Some  of  these  sarmiles  are  stock  items,  but  many 
cf  tnera  are  t..ie  wares  of  manufacturers  who  are  seeking  to  sell.  As  soon  as  the 
conventions  are  over  the  b-ayers  consoli-’ate  the  orders  of  all  the  stores  and  close 
tae  deals  \vith  the  manufacturers.  Goods  are  charged  to  the  stores  at  cost  rlus 
a,  small  percentage  for  handling. 

Hie  H.  T.  Grant  Company's^  method  is  similar  to  the  methods  alread^^ 
discussed.  However,  there  are  seme  differences.  Most  of  the  goods  purchased  by 
the  seventeen  buj^ers  ai'e  sent  to  the  fourteen  warehouses  and  distributed  from 
there  to  the  stores.  Hue  goods  are  billed  to  the  stores  at  cost  plus  seven  per- 
cent for  .iaxidling,  packing,  and  reshipping.  Hne  daily  letters  are  sent  from  the 


1 Interview  with  Ik.  Prady,  inspector  for  the  cempanju 


44 


warehouses.  The  "buyers  get  a straight  two  per  cent . corar.issiorx  on  all  goods  pur- 
chased. Should  any  of  the  goods  urove  unsaleable  they  ai'e  auctioned  off  and  the 
particular  buyer  charged  v/ith  the'  net  loss. 

In  the  ISroger  Grocery  and  Baking  Cowpary^  the  buyers  are  part  of 
a separately  organized  wholesale  bu.siness.  That  t?~.e  wholesale  business  is 
managed  efficiently  is  shovm  by  the  fact  that  goods  are  billed  tc  the  stores  at 


cost  ”lu3  three  to  five  per  cent. 

/.ll  of  the  chains  discu-ssed  so  far  have  done  their  buying  central- 
ly, i.  e.,  through  the  r.air  office.  At  this  ~'cint  it  is  proper  that  attention 
be  paid  to  another  uethod,  inasiruch  as  it  promises  to  present  some  important 
problems  in  t:^-8  f>ato3  development  of  chain  stores.  This  method  has  alread.y  been 
referred  to  as  being  characterized  by  decentralization.  The  nest  irnportant  chain 
using  this  system  is  the  Great  Atlantic  a:id  Pacific  Tea  Company.  Before  dis- 
cussing the  buying  system  of  this  chain  it  might  be  well  tc  consider  some  of  the 
underlying  factors  which  have  brought  about  this  decentralization. 

Tr.e  first  factor  has  already  been  discussed.  It  is  simply  that 
after  a certain  quantity  has  been  reached  the  manufactm’er s can  no  longer  afford 
to  give  increasingly  lov/er  prices.  Again,  as  the  chain  e:xpands  into  gigantic 
proportions  it  is  physically  irapossible  tc  supply  its  needs  from  one  factory,  or 
even  section  of  the  country.  In  addition  to  this,  s^-.ipping  and  warehousing  ex- 
penses become  greater  as  the  ends  of  the  c'''’.ain  become  more  distant  from  the  cen- 
tral buying  i^oint.  Hiese  are  the  factors,  then,  which  have  brought  about  the 
change  in  the  largest  chain  system  in  the  v/orld. 


Until  recently  the  buying  method  of  the  Great  Atlantic  and  Pacific 
Tea  Company^  was  very  similar  to  the  methods  already  discussed.  But  t’le  enormous 


1^  Printers'  Ink,  ITovember  IP,  1914,  p.  S4. 
2'  Interview  with  local  manager. 


, > 


Kj 


\. 


aj- 


•.-’KJ*  . il  • 


f ' / 


V -Tr  ... 


I . 


' ■■) 

',.  ■> 


f • 


■':r  '>  .»•  +* 


4 I 


*r 


"n* 


It 


.' ( ; . ;'«•  "H  O 


J(  ■■4 


r -•  ♦ t 


;:  /' ■' i,' '.i''-:t 


. . ■'^, 


^^7.  ' 7 


I 7.'  ■. 


•:'V' 


■ r »:■.  jt;  v;i . '.'Jiv-'  o " '»-tw1  • •„.,' 

• • ..  * ■ 4 ' 

.r  •" 


4. 

• • ' 


45 


grov/th  has  rcade  it  wise  to  dscertralize  its  hj.ying  operations  hj  the  establis/- 
Ksnt  of  disti’ict  '-varehcnses  with  resident  h'.'iysrs  in  nan^/  of  f^'ie  larger  cities. 
These  resident  b'.yers  receive  orders  from  the  store  rrai-iagers  of  their  districts 
an.l  do  f’'e  h-r'ing  in  the  same  general  v;ay  as  in  the  other  s.ystens  outlined.  Tl.e 
hryers  are  paid  on  a commission  "basis.  All  goods  are  hilled  to  the  stores  at 
retail  nr ices.  The  advantage  here  is  that  accounting  both  at  the  store  and  at 
the  main  office  is  simplified. 

Little  mention  has  been  made  up  to  this  point  of  the  erctent  to 
-iv-n  Grains  are  engaging  in  rnanufact'oring.  The  enormous  iiicrease  in  the  arrount 
of  mamif'',cturing  done  can  he  seen  hy  looking  over  tl.ie  stock  in  chain  stores, 
especially  grocery  and  drag.  A recent  inspection  of  the  local  A.  d:  P.  store 
shewed  that  perhaps  fifty  per  cent  or  more  of  the  articles  ai’e  manafactured  by, 
or  under  close  sr.pervision  for,  the  company.  Tliere  are  two  reasons  for  this 
increase  in  manufactrring.  First,  it  is  generally  conceded  that  chains  make  more 
money  on  t— eir  ovai  brands,  and  second,  it  is  '■  rfxtically  impossible  to  btiy  goods 
from  several  different  mairafacUu’er s w]:ich  are  s-afficiontly  uniform  to  be  sold 
under  one  brand. 

-i.n  coni^lasicn  it  mig..t  be  stated  that  there  seems  to  be  a farther 
tendency  in  the  chain  store  field  toward  integration.  T!:is  is  esp.ecially  nre- 
ncrnced  in  the  .grocer-  and  drug  chains.  r..is  tendency  toward  ac opairing  sources  • 
of  supply  has  been  motivated  naUu’ally  by  the  desire  on  the  part  of  tdie  chains 

(1)  to  obtain  a double  profit,  both  on  the  manufacturing  and  the  retailing,  aiol 

(2)  to  malce  sure  of  a source  of  supuly. 

In  spite  of  tho  criticism  presented  by  both  retailers  and  mam- 
fact^ares  in  regard  to  the  unfair  buying  practices  of  chains,  there  is  one  aspect 
which  has  proven  beneficial  to  the  cons'jimer,  viz.,  the  education,  on  the  part  of 


experts  in  t’le  e^iiloy  cf  chain  syster^is,  of  rnanafacturer s in  cntting  down  tl:.ei 
cost  cf  prohjicticn  throu^a  increased  efficiency.  One  has  hut  to  go  to  one  of 
the  Five  and  Ten  Cent  stores  to  convince  hir:self  of  this  fact.  There  he  v/ill 
see  nany  articles  which,  before  these  stores  handled  them,  sold  for  twice  as 


much  money  - or  more. 


47 


CHAPTER  VI. 


It  is  not  the  piirpose  of  this  chapter  to  determine  whether  chain 
stores  price  their  goods  lower  than  those  of  independents.^  The  parpose  is 
rather  to  make  a survey  of  the  field  and  to  present  soiae  of  the  outstanding 
points  in  connection  with  this  important  part  of  selling. 

One  of  the  most  ir.portant  factors  in  pricing  is  that  of  turnover. 
Other  conditions  equal,  a merchant  can  as  well  afford  tc  turn  $1,0CC  worth  of 
merchandise  tv/elve  times  a year  with  a net  profit  of  two  per  cent  as  to  turn  the 
same  amount  of  goods  six  times  a year  at  a foiu:  per  cent  net  profit.  A compari- 
son of  turnovers  oetween  index^endent s and  chains  in  some  typical  lines  reveals 
a marked  difference  in  their  rate.^ 


Line 

Inde':endent  s 

Chains 

Grocex'y 

8-20 

40  (high) 

Tobacco 

4-20 

50  (high) 

Variety  goods 

8-10 

10  - 12 

Drugs 

3-4 

12 

The  fact  that  the  difference  is  small  ’between  independents  and 
chains  in  varietx'"  goods  is  due  to  the  education  the  former  get  from  such  variety 
goods  Jo-otars  as  Butler  Brothers. 

Tnere  are  t’u’ee  outstanding  factors  accounting  for  the  rapid  turn- 
overs in  cnains:  In  the  first  place,  the  'b\ij.’‘ing  is  sc  efficient  that  unsalsa'bie 

goods  rarely  rem.ain  on  shelves.  Second,  the  methods  of  display  and  arrangement 

1 It  is  impossible  tc  make  generalizations  of  this  kind  without  su’bstantiating 
t— em  witc  a multitude  of  statistical  data.  It  would  "be  necessary  to  collect 
data  on  tnousands  of  articles  in  various  lines  and  compare  average  nrices  in 
chains  with  those  of  independent  retailers. 

2 Printers'  Ink,  December  3,  1314,  p.  65. 


,Sv‘^v 


Til  i»i  .^i.. ™ ’’^ 


// iai  >’.4!' ■■■  '•' 


.r, •«  . 

/ '^'T;'  i-  ■ '■«♦',  .'.'.'ii^U  , '?■  >.'  ■ B'  i 


I 


Ii'.:j,;.';\'  •v.;W-  '■',  , i,  fop-*'  ■;y'S. 

^'li!^‘lv  . v>V> '-^r^v 


V 


. .'M,  *S*  ■ "'  • , „ 

. a >1  i n ><a.  .f  .'^  'V  »»  ' >^|^riHi»^>V<  ■■•*  •’#\')« 


^i-,  r'<^i 


r ’ >’•■ ' 9j:s  i ; -m'  | Tp  • r r : ' 

■/^<  i y_^  i^l.- Aji^TT;  '.'  /f»^' r'4,!  ,l.i.  ifct- 

.iic 


. ’«■'#  „ ' 

. ..r'^,,, , fv. 


' i V ^ '»  'TV/ ■ C 1*1)1 

fe'f'‘.  "Wf  rj:  *i  Vl  'C4.  Vj  ''vv/ 

.'t'  .Mr  :b:j  !«sia.V  ' %>.' 


. 'a.'  ? 1 I 


'^i-.i-  ‘'i 


hIV 


H''- 


.11  ',  :'■ 

■ mV  r.K>i 

mr  • ■ • . ’ ^ • r ■ II 


r '.i 


WiBP*  y-'f  • ■’'!  ■ ' L'-'  ' ' r . 

I3AQE  ,.,:  ■ , ■„^.  . iA\  . . /<io  ., 


»(Sy 


* . vj'l».i tfitv  V i-.  V ''4: \} i a .,  w.'.*4 S>^.  .. , X?.-, ii^j|.R4jXi: 


46 


are  ver^  effective  in  selling  goods.  Tliird,  chains  have  a reputation  for  lov/er 
prices.  1 discussion  of  the  first  tv;o  factors  has  teen  talcen  up  elsewhere,  aiid 
the  third  has  been  referred  to  in  the  heginning  of  this  chapter.  The  following 
statement  is  made:^  ”It  is  obvious  that  the  chain  does  price  very  low  on  a score 
or  more  of  nationally  advertised  brands  in  its  line  v;hich  have  standardized 
values  and  known  prices,  and  also  on  certain  goods  where  costs  ai’e  more  cr  less 
IcnoWi’n  to  crastorn,  but  it  is  possible  for  one  to  satisfy  himself  by  shopping  .around 
and  inquiring  of  any  retailers,  jobbers,  and  manufacturers  that  the  majority  of 
chains  do,  as  a matter  of  fact,  in  many  instances  price  higher  on  other  goods 
and  get  a larger  profit  on  their  ov/n  private  brands  than  do  the  independents  in 
their  nei^fcox-hcod  cr  in  similar  neighborhoods." 

Tliere  are  four  general  methods  of  pricing: 

1.  Certain  percentage  over  cost  of  goods  and  cost  of  doing  busi- 
ness. 

2.  Tlie  application  of  the  first  method  to  unbranded  goods,  but 
maintenance  of  jjricas  on  all  nationally  advertised  brands  and 
on  private  brands. 

3.  Largely  based  on  competition  and  custom. 

4.  Standard  pricing,  goods  being  bought  to  sell  at  a certain 


price . 

Mr.  Bowers'  Stores,  Inc.,  uses  the  first  method  exclusively.  Ill 
goods  are  marked  up  to  bring  a 12^  to  15p  gross  or  a 2)j  net  profit. 

Tl'.e  second  method  is  used  quite  extensively  by  independents;  only 
a few  chains  use  it . 

1 Printers'  Ink,  Peoember  3,  1914,  p.  66. 


. . 4^ 


49 


T;i0  third  method  is  used  wher.  "buying  is  irregi'.lar  or  speculative 
and  competition  is  keen.  Srocery  and  drug  chains  use  the  depart.'isnt  store  scheae 
of  shoppers  in  keeping  tab  on  their  competitors'  prices.  Special  sales  and  all 
special  offers  come  under  this  method.  Examples  of  these  are  t?ae  "1  cent  sales” 
of  the  Eexall  ■dr'ag  stores,  in  which  instance  the  purchase  of  an  article  at  the 
regular  price  carries  with  it  the  privilege  to  Vay  another  one  for  one' cent  addi- 
tional, also,  the  special  offers  of  the  United  Cigar  Stores.  At  certain  times 
these  stores  have  clearance  sales  of  pipes,  for  exarqr.le,  and  each  purchaser  is 
given  a certain  percentage  of  his  purchase  in  tohacco.  Althougla  prices  are  main- 
tained, in  the  finad  analysis  this  is  a form  of  price-cr.tting. 

Tlie  fourth  method  is  "best  exeim:>lified  hy  the  buying  of  the  Five 
and  Ten  Cent  stores.  In  this  case,  no  matter  what  is  paid  for  the  article,  it 
must  be  sold  for  five  or  ten  cents,  so  pricing  is  the  constant  factor  while  buy- 
ing is  the  variable.  Another  example  of  this  method  is  seen  in  the  practice  of 
buying  men's  clothing  to  sell  at  a standard  price. 

Host  chains,  especially  in  the  drug  and  grocery  lines,  cut  prices 
consistently.  However,  :k.  Bov/srs'  Stores,  Inc.,  v;as  the  only  chain  found  which 
does  tuis  on  all  articles.  The  general  practice  is  to  cut  prices  on  established, 
nationally  advertised  brands  - where  the  cut  can  readily  be  seen  by  tie  public. 

In  the  majority  of  chains  the  advertisements  refer  r.ostly  to  well  kncv.n  brands 
arid  staples.  However,  when  a chain  becomes  very  strong,  as  in  the  cases  of  the 
Sreat  Atlantic  and  Pacific  Tea  Conp^an^r,  the  Hexall  stores,  and  the  United  Cigar 
Stores,  it  is  no  longer  necsssarj^  to  feature  such  articles  most  prominent ly  in 
the  advertising. 

It  is  interesting  to  note  the  change  mads  by  the  S.  S.  ICresge 
Cor:3pan’’’  during  the  recent  period  of  high  prices.  Variety  goods  stores  were  faned 
v/ith  the  problem  of  either  discontinuing  some  of  the  lines  which  could  no  longer 


50 


"be  "bouglit  to  sell  at  ten  cents,  or  changing  their  v-olicies  so  as  to  sell  goods 
at  more  than  the  nsual  ten  cents.  The  Ilresge  Compai'iy  established  its  "G-reen 
■Fircnt”  stores,  selling  in  them  articles  up  to  $1.00.  Tlie  res^jilt  was  that  while 
some  of  the  variety  goods  chains  were  forced  to  discontiirae  several  items, 

Eresge  was  able  to  keep  them  and  sell  them  at  a slightly  higher  price. 

Two  conclusions  are  possible:  (l)  Tne  ccmnon  practice  of  chains 

is  to  cut  jjrices  on  standard  articles  and  maintain  prices  on  their  cv/n  brands, 
and  (2)  Whether  or  not  chains  sell  at  lower  prices  than  independents,  neverthe- 
less, they  have  the  reputation,  gained  largely  through  advertising,  of  selling  at 
lower  prices. 


r-'i”,' 


,,  .>■'  ^ .;;T.‘ . 

'h;'  ■»«!_■' V,  ; 


F'  WM-"  ■,:■  ‘,a  A "-I-''  -V' ' - \ > iMimm 

f4-’P  ,.j;>  • J'-i'l  ' vifiS,.,;,  ,■,  'St-j i 

1 1 , ■. :: . . . ■"■^'' ' !yf-»  : . ■ h. 


:ra 


3.^- 


„ji«.  I'  tt . ' 


n ' 

l*l.‘  * 


p \ . ■■■  '• 


'■  ' ,y*  ' '■'  '■•■  ‘p  lA.fi  i*  4‘.^ 

i ' L ' ' ' ■ ' ‘ ■^'' ' ^ 


Vi 


rS 


iW-*^ 


■'  <". 


^ 'i 


? • ,>  Si  1 ^ :"‘  'fel.  VSraTO*’ 


, , '■  '5 

it,"i  -r  .e;,  . , of’:.  , -i'Tt-j? 


■V 


<”  -j^  • ^ '‘J5  •‘•la 

-'J?..*'  X, 

'/  , V /.'■  . ’.'fijt  :■ 

'*V2  ■ ' • :?\ilf 


I "I  . » ‘ 

^Jk»*  ■ . w n-j  ^.:  - A . ; . ‘hi  < 

> .V/  . ..  '*'  •',  t.te¥^  . ■'.^'  'W  m 


(>v: 


fp" :' 


Sj;^  3,  ay-  j|.!'  ■ 'V  i ■>  ' t .'  ♦ u '''. . 


10 

'''''  ' 

Wii-"' 


►'  y^ 

4\ 


v'lV  ^/3P: ! ‘ 


•At' 


. _>:  •'^  > ! •}’  < ■ ‘ Si.  Jvi. 

A 0 fj  rbj;  > 

Ik  ,k^r'''"w^ 

.VL 


mi 


iVii' 


t r 


.1^, 

■■>•■■ 

,m 


•r'^ 


yp 


H>;%v- 


,'.V.^ 


7 


r^- 


V-  7. 


'•H 


L ^ A- 


ifT-lil*  ' 


'»•.  > i".. 


■A,  t 


-;ff,  k,  . » •■ 


fit 


<V1 


rS  X< 


'■n 

>?a 


'3'- 


51 

CHAPTER  VII . 

Selling  forces  are  of  two  kinds  - personal  and  inpersonal.  The  fornicr 
deals  with  the  personnel,  from  the  rmanager  to  the  lowest  paid  clerk.  It  has  al- 
ready "been  shovm  that  standardization  "balances  these  personal  forces  in  chain 
stores  to  a large  degree.  But  the  impersonal  forces,  which  include  v/indov/  dis- 
plays, interior  merchandise  displays,  and  the  efficient  arrangement  of  counters, 
ta"bles,  shelves,  etc.,  are  of  vital  importance.  "...  Fully  forty  per  cent  of  our 
total  sales  may  "be  traced  directly  to  shop  arrangement, " says  a successf’:!  retail- 
er. The  man  who  visits  a store  planning  on  purchasing  a shirt  seldom  realizes 
hcv/  cleverly  that  departn.ent  is  located  so  that  he  rrnist  pass  collars,  neckties, 
socks,  etc.  in  order  to  reach  it.  This  is  one  of  the  fundarrient a 1 principles  ob- 
served by  chain  stores  (and  many  successful  independents)  in  planning  the  arrange- 
ment of  their  stores.  Another  principle  to  be  kept  in  mind  is  that  window  dis- 
plays must  be  supported  by  an  attractive  store,  for  no  matter  how  efficient  the 
arrangeir.ent,  or  how  good  the  window  displays,  an  unattractive  store  will  not  draw 
trade . 

That  chain  stores  have  made  infinitely  more  progress  than  independents 
in  this  matter  of  arrangarent  is  apparent  even  to  the  most  casual  observer.  If 
anyone  is  skeptical  on  this  point,  let  him  enter  one  of  the  stores  of  any  chain 
system;  three  things  will  strike  him  favorably  as  soon  as  he  enters  the  door  - 
and  often  before  - cleanliness,  order,  .and  the  ease  with  which  he  can  make  his 
way  from  counter  to  counter. 

Store  arrangements  have  been  so  highly  systematized  that  in  almost 
any  chain  an  employe  who  is  transferred  fi'Orr.  aie  store  to  another  can  start  work 
imniediately  - he  knows  that  the  goods  are  in  the  same  relative  places  as  in  the 

1 Shaw  Conpany,  How  to  run  a store  at  a profit,  p.  53. 


■'■/ifjj  ^ '"  ' ' 'V-  I ' 

...  . ' .:'  ■:'!  f.';.  ' ..  . ..._■  .V'''  . 


Ir  V 


V 


- • ' '■  > ' * '<  '*"  ' "V  ^ '^'  ''r'.’ J ’'  , "■  ' B*"'''  " 

••  ;’■?■'  ' ',  >.  . ^-i’3/t.  iatt*  . , 

‘ AfvfcP''^  , - A ''  ..3T  .*  ‘ 

'■  M ....  , , . r'!*:  _ '■,"  . u 1 . ' Jkaift  .>■• 


t ‘i 


,.  ,j  ",  .V  


? r>:  ’ ’’  ' • ’ r 


S'  ' ■;  y|  ' • ';  : ‘-.' ' * 'i  « ;., '|;.^|i,.  ‘ ^ ' ' -V  - ' 

'.  '.  . 1 J «•''■'■  \“^  '■  ; ’■■'la 

““  <i..t  laU-y  i,f^  vA 

- * * ■ -‘  ■ n-^i.w  . I MW  ' H k«fi 


4I1  If -'I  n... fiU'  •s.Ml? 


Ui’v  . . ;*  . >•  fk>4A.u,  .f;ti<i  -;6f^  '‘•-'i^  1? 


I'.  ■. 


■V 

*■  ( I 


.V  «vj 

■*.,  >.i 


; ,.r:  " 1 ' ' . ■ • 


M A,  j-.  ilh*AyT  n;i‘!^tiifijlii^,.i'tih».t ' iW'ltrf  -.'i 

''..;'1h.,- .'.'I  ■ , >V'..  ' . '■. 'V4^|j^<9r 

‘ ’TV''! 

•i‘>. 


-.,.j.  ->  ,iv  ; fiV' 


♦ 

>.'■?  , 


‘■.  n-*  ti  fi;0^  rA  ,‘:U>  '.•^’  ' 't/  .,vffr^^vV^pf  f f..  - 

. - S'  H ' ;.  4af  ’ ^ f4  W'  44  '*■ 

• ' .-  W .V'  ...  .iV'r,-,  ■;'  ■■;. 


• I ,’.'! 


0 *tm£' 

. ’J'  r'.%  '.  '' 

'...iju>iiut"t  ,ji‘j 


i ...  . .. 


52 

store  from  which  he  cair.e.  There  is  another  advantage  in  that  a custcnier  entering 
a United  Cigar  Store,  for  example,  knows  exactly  in  which  part  of  the  case  his 
favorite  cigar  is. 

As  mi^t  well  he  expected,  all  chains  investigated  have  a special  de- 
partment to  taice  care  of  the  problems  connected  with  store  arrangement.  Building 
a store  exactly  to  one's  requirements  is  a simple  matter;  remodeling  an  old  store 
so  that  it  v/ill  exactly  meet  the  needs  of  the  chain  store  is  a rciatter  calling  for 
greater  skill.  The  chains  have  acquired  just  such  skill.  Recently  the  writer 
was  interested  in  v/atching  the  Great  Atlantic  and  Pacific  Tea  Company's  man  re- 
model a vacant  building.  The  man  arrived  on  the  scene  early  one  afternoon,  laid 
out  his  blueprint  and  sawed  the  lumber  for  the  shelves  and  counters.  By  noon  of 
the  third  day  the  store  was  ready  for  business.  The  shipments  of  stock  and  fix- 
tures were  so  tinned  that  the  manager  began  his  work  of  arranging  stock  on  the 
prescribed  seventy-two  feet  of  shelves  even  while  the  service  r'an  was  yet  at 
work.  Practically  all  chains  now  use  this  standardized  method  of  oi^ening  nev/ 
stores  which  seeixis  to  have  originated  with  the  S.  S.  Kresge  Company.^ 

Perhaps  no  better  idea  of  the  details  of  arrangement  can  be  had  than 
by  exan.ining  into  a system,  the  success  of  which  depends  largely  upon  arrangement. 
Clarence  Saunders,  of  i.lemphis,  Tennessee,  inventor  of  the  Piggly-Uiggly  system 
of  self-serving  stores,  explains^  that  he  adopted  the  na.me  "Piggly-Wiggly"  in 
order  to  have  a nam^e  which  would  be  distinctly  individual.  Under  this  system 
provision  is  made  for  an  arrangement  which  utilizes  as  efficiently  as  possible 
all  floor  space,  and  which  provides  for  the  selection  of  goods  by  the  customers 
v/hile  they  maice  a circuitous  path  thrcu^  the  store.  Gastomers  are  provided 
v/ith  baskets  while  in  the  store,  into  which  tiiey  put  the  merchandise  selected. 

1 Printers'  Ink,  November  12,  1914,  p.  69. 

2 Modern  Merclnmt  and  Grocery  '’orld,  November,  1917. 


53 


the  end  of  this  circuitous  i>ath  the  custorriers  pass  to  the  checking  and  settle- 
ment station. 

The  Saunders  Self-Serving  Store,  one  of  the  elements  in  the  system', 
was  patented  October  9,  1917.  It  is  "an  apparatus  for  vending  merchandise  ar- 
ranged in  merchandise  display  cabinets  or  holders  at  distances  apart  fonrdng 
aisles,  with  passage  ways  at  alternate  ends  of  the  adjacent  holders,  a turnstile 
at  the  entrance,  with  another  turnstile  at  the  exit,  whereby  customers  that  pass 
thro^igh  the  store  are  controlled,  and  in  which  there  is  a packing,  checking  and 
settlement  station  adjacent  to  the  exit."  Other  details  of  the  system  are: 

1.  The  Saunders  Self-Serving  Store  furniture. 

2.  Mirrors  in  diamond-pointed  ends  of  the  main  display  cases. 

3.  Swinging  price  tags  in  each  compartment  division. 

4.  A special  price  holding  device  for  use  on  sack  flour. 

5.  A tv/o-sided  display  refrigerator. 

6.  A two-sided  display  case  for  cured  meats. 

7.  Specially  designed  hami  rack. 

8.  Sugar  bins. 

9.  Bins  for  package  goods. 

10.  Candy  case. 

11.  Mince  meat  and  pickle  stand. 

12.  Frait  strand. 

13.  Bread  stand. 

14.  School  supply  and  stationery  stand. 

15.  Broom  and  mop  rack. 

16.  Bargain  display  rack  - all  of  which  are  constructed  in  such  a 
manner  as  to  secure  mximurn  efficiency. 


L 


V'' 


' \ - i i 

\ 


^' -?.  ■ . c-‘  c<.'.  ’,'  . ''Vipyt  •»<*■*, 

'•■•  ■ ■ T'  . V 


'V'  * 


V ’ \a*  ^ ^ 


;>  V • 1 

■ ■' 

^■!  : 


' i 1 


; dtj 


^ i > ■if ' 


* - . 


■ ; . ■'  i'( 

A .)r 

T f 


. S •*;?. 


■:-y 


. '.  i' 


54 


17.  Specially  constracted  stock  room  f-ornitm-e  with  removahle  tray 
combinations. 

18.  Specially  constracted  potato,  orange,  and  lemon  bins;  also  nieat 
and  lard  counters  for  stock  room. 

19.  Specially  constructed  stock  room,  counter  with  bins  above  and  below 
providing  a dual  capacity  for  econor.Ty  of  time  in  assembling  at  one 
point,  articles  to  be  weighed  on  automatic  weiring  m.achine  and 
also  those  articles  that  can  be  weighed  only  by  hand  methods. 

Some  interesting  and  instructive  facts  can  be  determined  by  a study 
of  the  arrangement  of  goods  in  chain  stores.  More  attention  has  been  paid  in  the 
Five  and  Ten  Cent  stores  to  the  scientific  arrangement  and  display  of  goods  than 
in  any  other  line.  The  reasons  for  this  are  obvious,  viz.,  most  of  the  goods  sold 
in  these  stores  are  convenieiice  goods,  and  the  sales  help  is  of  a low  grade. 

Thera  are  three  general  factors  in  the  arrangement  of  Five  and  Ten 
Cent  stores.  In  the  first  place,  everything  on  sale  is  displayed  v/here  it  can  be 
plainly  seen.  Second,  despite  the  large  volume  of  goods  displayed,  the  general 
appearance  of  the  store  is  orderly.  Again,  the  arrangement  of  counters  and  fix- 
tures is  such  as  to  make  it  easy  for  the  customer  to  pass  from  counter  to  counter 
without  undue  effort.  Aside  from,  these  general  factors  sane  specific  ones  brought 
out  in  the  investigation  are  sumriarized  as  follows: 

1,  Five  and  Ten  Cent  stores  almust  invariably  have  two  entrances,  one 
on  either  side.  If  the  store  is  on  a corner  it  has  a third  entrance 

/the  side.  This  is  due  to  the  fact  that  the  stores  are  located  on 
streets  where  the  traffic  is  heavy.  So  two  or  three  entrances  make 
it  easier  for  people  to  enter. 

2.  Candy  counters  are  always  found  just  inside  the  entrance,  v/here 
the  sight  and  smell  of  the  candy  attracts  people  passing  outside. 


\ 


i 


. ' '■  \ 


\ 


. < 


•'i . . 


56 


Candy  and  cakes  are  often  displayed  in  several  different  parts  of 
the  store, 

3,  Toilet  articles  and  drugs  are  given  a place  almost  as  prominent 
as  candy.  In  the  larger  stores  they  are  directly  opposite  one  of 
the  eatraiices,  hut  in  srr.aller  stores  they  occupy  the  counter  dir- 
ectly hehind  the  candy, 

4.  The  soda  fountains  and  I'unch  counters  of  the  larger  stores  are 
usually  placed  opposite  the  right-hand  entrance  and  against  the 
wall,  because  this  side  is  less  congested  than  the  left.  In  this 
way  they  draw  not  only  the  people  who  are  in  the  store  but  also 

an  appreciable  amount  of  trade  from  without.  The  largest  V/oolworth 
stores  also  have  cafeterias  which  take  up  part  of  the  second  floor. 
However,  it  is  said  that  the  cafeteria  is  maintained  more  for  con- 
venience of  the  customers  than  for  profit, 

5,  Notions  occupy  a prominent  position  in  the  front  part  of  the  store 
because  they  are  such  common  articles  of  purchase, 

6,  Drygoods,  millinery,  and  glassv/are  are  usually  found  on  the  second 
floor  or  in  the  basement.  People  will  walk  up  or  down  a flight 

of  stairs  for  these  goods  because  they  are  more  nearly  shopping 
than  convenience  lines, 

7.  In  general,  shopping  goods  are  so  located  as  to  necessitate  the 
customer's  walking  past  as  many  other  lines  as  possible.  This  is 
why  hardware,  garden  goods,  etc.,  are  in  the  back  of  the  store  and 
related  lines  are  around  therri, 

8.  In  stores  having  basements,  stairways  are  found  both  in  the  front 
and  in  the  rear  of  the  store.  Stairways  are  always  very  wide  and 
so  arranged  as  to  enable  several  lines  of  merchandise  to  be  seen 


56 


from  above. 

Ixi  drixt;  stores  this  natter  of  arrangenient  has  also  received  consider- 
able attentiozi  but  apparently  not  so  much  as  in  Five  and  Ten  Cent  stores.  There 
are  two  reasons  for  this:  first,  the  nuaber  of  lines  in  the  drug  store  is  smaller, 
and  second,  personal  salesrrianship  is  an  important  factor.  However,  some  princi- 
ples of  arrangement  were  noted  in  this  investigatioii  and  are  sumEiarized  here: 

1.  Counters  and  cases  are  arranged  around  an  open  middle  space.  Ex- 
cep't  for  an  occasional  magazine  stand,  the  center  of  the  floor  is 
kept  open.  So  the  line  of  passage  is  along  the  counters  rather 
than  between  them  as  in  the  Five  and  Ten  Cent  stores.  This  is 
explained  by  the  fact  that  the  drug  stores  pay  twice  as  iruch  rent 
in  proportion  to  sales  as  Five  and  Ten  Cent  stores  and  conseq^uent- 
ly  must  confine  themselves  to  less  space. 

2.  Cigar  stands  are  found  just  inside  the  entrance,  on  one  side. 

This  is  because  men  insist  upon  convenience. 

3.  Soda  fountains  usually  occupy  a prominent  place  near  the  entraxice, 
for  the  purpose  of  dra\'dng  trade  from  the  street.  However,  in 
sonB  cases  the  fountain  is  located  crosswise  in  the  rear  of  the 
store.  In  the  latter  case  it  attracts  the  customer  who  is  already 
in  the  store  rather  than  the  passerby.  Indications  are  that  the 
location  near  the  entrance  is  the  t'ore  profitable  one. 

4.  Patent  medicines  and  prescriptions  are  usually  near  the  rear  of 
the  store.  The  reason  here  is  that  people  are  willing  to  v/alk. 
back  for  tliese,  v/hich  might  be  called  quasi -shopping  goods. 

5.  Such  convenience  goods  as  toilet  articles,  including  perfumes, 
manicure  supplies,  etc.,  ::ire  conveniently  located  not  far  within 


the  entrance. 


57 


6.  RvJb'ber  goods,  on  which  there  is  a large  margin  of  profit,  are 
displayed  more  conspicuously  than  in  the  average  store  of  the 
independent  druggist. 

7.  In  general,  it  can  he  said  thiit  some  effort  has  been  rra.de  to  dis- 
play goods  in  such  a way  that  one  article  suggests  another.  How- 
ever, it  must  be  borne  in  mind  that  the  chain  store  druggist  re- 
ceives considerable  sales  training  and  consequently  suggest ions  are 
made  rather  by  word  of  mouth. 

In  conclusion  two  facts  should  be  pointed  out:  (l)  The  matter  of  store 

lay-outs  has  been  developed  and  standardized  to  a high  degree  by  chain  stores, 
and  (2)  Low-grade  sales  help  is  balanced  by  this  standardization  of  arrangement, 
which  is  one  of  the  Important  factors  in  selling. 


i w>-- 


.'•f>4  , -:r 


i?^-x\’'-si'  a: V.  V c 

j^fi i V -V  Bh  -t^'  -(feu: ; 


^ro!-  .•■>w7'. ■¥'/..  ''^  aA- ' '.  ■■T»i  ,..,  I 


ft  V':’Mf\  ■V'l'l? 


'\m'  . ca 

ff-  ^ 

, ,.. . i ..  ..  ••  ■■  •.i:/’.a 


„J[-l' 


Jffe.9  i'Xt  ct  . 

,;t  :*..;i.,_. 


’■  ■ *■■  .1^5^  ^ if  ^ ^.,TP’*'  , \ 

X'  t*s.f*it-  'W  •/■ 

|b>  I 1 j *'"  ‘ -t  - ^ •'  j >''' 

* j Ij vV'i-*; . 7;-^  :, - Ct>  : h.&  ho&ttXi^ 


■ 1 ■1 


_V>l7  ,...,» 

„ , , - ' .’*>4i^,,^..^.. , 

1 nHS  \ii  'i'%yftf!^'jA'<''  ''h#|.fi<t\''’5£v:’4-^^^ 

J . „4  * •»  ■ • 

ir  ; '■'•  i-vVft- 


Mi 


ft 


^!2:/iv/' 


k V 


.'-■  ‘ V ■,  ...  ■t‘kSr*" 


■ .Vrt 


/* 


.^'1 


’fir 


*4  A 


9* 


m 


«,  S‘/j 


Mil 


V »;■  tA 

*'  ‘.  • Kt 

:'•  ‘/  .^1- 


A 


■■Vlv, 


.4  '■■i*'*! .. 


\ ■■  yi 


.*  *t>'i 


'1  • ' I 

■;-'‘l,  M'‘ 


^ i . !"'  . 

• ‘ t'(l> 


■m 


,■!»' 


i.’^  ■ 


. V • ;y 


t>n 


, 7 . ',  • ,'!  |‘^*  ' 


V 'i 


.11 


fT. 


JN' 


, A -..il' 


'jr 

' t ■■ :, 


•;3i' 


'H 


_v  *j 


-»/,  I ' 


.4; 


,7/S'' 


0 


W' 


%T^vr^: 


ic 


I 'I'ifliwiijaM'iu**'] 

J 


58 


CIIAPTER  YU  I 

T^iere  is  a general  tendency  among  independent  retailers  to  con- 
duct their  husinesses  without  adequate  accounting  systems.  Since  the  advent  of 
the  income  tax  there  has  heen  some  inprovement  in  this  resx:sct,  hut  it  is  safe 
to  say,  even  if  they  had  uniform  systems  of  accounts,  they  do  not  know  how  to 
use  them  to  get  desired  resr.lts.  Chain  stores,  on  the  other  hand,  have  efficient 
acco'anting  sj'-stems  which  give  a maximum  of  information  in  simplified  form. 

Accounting  performs  four  irrporta:it  fi^nctions: 

1.  Provides  a knowledge  of  actual  operating  costs. 

2.  Gives  statistical  information  as  to  the  financial  status  of 
the  company. 

3.  Locates  leaks  in  the  business  and  is  t?ae  means  of  their  eliimina- 
tier*. 

4.  Provides  a scientific  oasis  for  buying. 

First,  since  cha,ins  operate  on  a low  margin  of  profit,  it  is  im.- 
perativo  that  they  know^  their  operating  costs.  'P..9  United  Cigar  Stores,  for 
exai:p;le,  knows  that  when  the  percentage  of  rent  to  sales  exceeds  Sp  in  a certain 
store  somaething  must  be  dons  to  increase  the  sales. 

Second,  statistical  information  is  necessary/  for  a comprehension 
of  the  financial  status  of  the  corapany.  Tiie  directors  and  stockholders  of  a 
chain  insist  on  knowing  whether  tlie  business  is  making  money  and  at  what  rate. 

Tnird,  in  the  h;ands  of  exf-^ert  accountaiits  a scientific  system  of 
cost  accounting  can  be  made  to  shew  leaks  in  t’ae  bmisiness  by  analyzing  the  various 
9:qvense3  and  by  checking  reported  irrentories  against  physical. 


Li  . « 


• ,ri  ^sfT( 


* ft 


X'  i'._ ■'-• 


ii^U  i >. 


?«  .»  >1-  —i'  ^'1  it  JQbMiM  tB  V -5^ />«*. 

1'#^ 


'V 


r.  ?.J 


. ^ It  ‘r'1^  .vr  * 


«:?  .’I'-  .•}  M ly^ 

' i 

'*  Ji  tj_j*tr  •'■  !i-Ai ■’’^ 


" '-V 


» JJw>*  • V 


IV 


1<  ■•'««:'.  tv  0^4 


* ^ ■ ■ ■ ' ^ • • ''--t^,'.:^  1 < :^w.. 

i (f ii'  t J*'*''-  ::  4^ V.T,  V'vf '■*•.'  - '"  '''  'fiA^ 


■•  'f 


‘ ■ >iu  io'jlJL  *i  > 


iV,  ( 


■>  , » ' • 

''  ^Ik.  ri <fr*  *'  ti i . t fcji*  (.•  !i 


»v-  V . m 
■ ! ^ 


' *:.  '■  ."■>^' Jr, '"  '■  :■  T , '..  jJ:.  ■ ■ ’ ■ '■  v.'^  ' Hr  i!>  ' 


vfl 


■ . □inn  W'  s t V. 


J?  ^ 


ti^il 


52 


Perhaps  the  :nost  iKportant  f-anction  of  accounting  is  to  serve  as 
a ’oasis  for  tuying.  In  all  c’io.in  systen-s  statistics!  departir.ents  ar-e  iiair.tained 
v/liic*  do  nothing  tut  compile  elatcrats,  yet  simple,  statistics  on  all  phases  of 
the  tusiness.  Vhelan,  the  foremost  executive  in  the  United  Cigar  Stores  Company' 
of  Anierica,  has  evolved  pjerhaps  the  most  complete  statistical  method  in  use 
among  chain  stores,”  Without  leaving  his  deslc  lie  can  refer  instantly  to  data 
which  will  tell  ’lim  exactly  how  mar,^'-  cigars  of  any  rarticulai*  "brand  v;ere  sold  in 
ai'^'’  of  his  stores  on  any  day,  and  what  the  p:er  cent  of  increase  was  over  the 
previous  year.  In  all  chains  sucl.  comparative  data  are  used  in  determining  sales 
quotas. 

Invar lahxy  tne  general  accounting  is  done  at  headquarters,  store 
managers  "being  required  to  keep  only  records  of  goods  received  and  sold,  and  an 
expense  account.  Every  store  manager  is  req'aired  to  send  to  the  main  office  a 
daily  or  weekly  report  of  sales,  summarized  by  departments.  Eness  reports  s’ncw 
amount  of  goods  ordered,  ar/iount  recei-'.-ed,  and  balance  on  hand.  This  balance 
is  checked  with  an  inventory  report  made  monthly  by  the  store  manager.  Cash  is 
us’cally  deposited  ddly  in  a local  bank:  and  the  deposit  slip  mailed  to  the  trea^ar- 
er.  In  some  cases  a draft  is  sent. 

An  elaborate  system  of  accounts  is  kept  at  the  main  office.  In 

2 

one  c.iain  the  following  records  and  reports  are  kept: 

1.  Daily  recei\?-ing  sheets.  Shcv.lng,  by  departments,  all  goods  re- 
ceived frcrn  all  sources  of  supply. 

2.  Daily  sales  report.  Showing  receipts,  by  depai’tments. 

3.  Contingent  fund  report.  Showing  pa^rr.'.ents  made  for  various 
e:c'enses. 

4.  V’eekly  pay  roll  renort . 


1 System,  hay  1216. 

2 Swinney,  herchandising,  p.  317. 


so 


Conclusions  here  are  hardly  necessarj^.  Ilov/eyer,  one  iriportant 
point  hrou^it  out  deserves  emphasis,  viz.,  that  the  reporting  system  developed 
"by  the  accounting  departments  of  chain  stores  is  invaJuahle  in  that  it  shows  the 


condition  of  all  stores  at  all  times. 


51 


CIIAPTEI  IX 

T.iat  inspection  has  played  an  important  part  in  the  development  of 
chain  stores  cazi  he  seen  h^’’  examining  first  the  reasons  for  its  existence  as  a 
fanction,  and  second,  the  riethcds  used. 

Keference  to  seme  of  the  characteristics  of  chain  stores  f-arnishes 
a good  basis  for  the  discussion  of  inspection.  In  the  first  place,  a high  degree 
of  standardization  is  alw.aj'’s  found.  This  cannot  he  maintained  hy  the  low  class 
of  help  unless  some  all-inclusive  system  of  inspection  is  inaug’arated.  Tloe  fau.lt 
is  net  due  directl2^  to  the  store  manager  for  he  is  alwa^rs  striving  to  maintain 
the  ^■‘ign  standards  required.  It  is  due  rather  to  the  psycholop'ical  fact  that 
low-grade  help  will  not  perform  in  tho  best  manner  unless  it  is  constantly  s-rper- 
vised  and  its  ^7ork  inspected.  It  cannot  be  expected  that  tho  manager  will  de- 
tect eac"'-?  and  ever^A  deviation  from  the  standard.  Sc  it  is  necessary  for  the  in- 
spector to  look  with  perspective  or.  the  vdiole  situation  and  point  out  the  details 
v/hich  do  not  conform  with  set  standamds.  Again,  there  are  many  points  on  which 
the  manager  ma;/  become  lax,  s"ach  as  piling  goods  too  high,  permitting  dust  tc 
collect  on  ther.;,  etc.  Such  matters  are  noticed  and  corrected  by  the  inspector. 

Since  chain  stores  operate  on  a low  margin  of  profit  it  is  neces- 
sary that  all  sources  of  loss  be  eliminated.  Hiis  is  especially  true  in  ccmecticn 
with  weighing  and  measuring.  Another  characteristic  is  the  substitution  of 
window  displays  for  advertising.  Esi^ecially  in  the  case  of  Five  and  Ten  Cent 
stores  the  inspector  m.ust  pay  particular  attention  to  the  window  displays  and  de- 
termine whether  they  follov/  the  general  policy  of  the  company  and  the  dictates 
of  reason. 


62 


V.ith  cne  exception  (J.  C.  Penney  Conipany)  all  chains  investigated 
x'.ad  systems  of  inspection.  Por  the  most  part  there  is  not  r.aich  variation  in  the 
methods  used,  so  a rather  general  treatment  is  permissible  here  before  consider- 
ing the  methods  used  by  some  typical  chains. 

Tl.e  following  qaestionriaire  form  of  outline^  gives  a very  comprehen- 
sive idea  of  hew  the  inspector  goes  about  his  work.  If  the  outline  seems  long  it 
umst  be  remembered  that  the  work  of  th.e  inspector  is  long  and  tedious. 

I.  Information  gathered  before  visiting  the  store 

1.  3-eneral  rejjutation  of  the  business  aiid  the  -management 

2.  Personal  habits  and  hone  life  of  t’le  manager 

II.  General  information  gathered  at  the  store 

1.  Checking  of  accounts  and  cash  registers 

2.  Condition  of  the  manager's  desk 

3.  Personal  appearance  of  manager 

4.  Comparison  of  sales  wit):  quota 

III.  Information  as  to  the  stock 

1.  Are  goods  piled  right? 

2.  Are  there  anj^  faded  goods  on  display? 

3.  Are  goods  displayed  too  long? 


11.  Employes 

1.  Are  they  q-aalified?  Heat?  Intelligent?  Aggressive? 

2.  Are  they  cai’eful  in  weighing,  meas^aring,  counting,  use  of 
twine,  paper,  etc? 

3.  Are  they  s-afficiont  for  the  volume  of  'trade? 

V.  Tl:e  next  move  is  a general  survey  of 

1.  Counters 

2.  Sign  sets 

1 Pi  sic.  Petal  1 Selling,  p.  313. 


63 


3.  Price  tags 

4.  Qaai'itity  of  tools  in  t'.'e  stock  room 

5.  Fixtures  - windows,  cash,  and  sign 

VI .  In spe c t i cn  of  windows 

1.  Are  t?'.ey  clean? 

2.  Are  goods  seasonable? 

3.  Are  sufficient  profit-malcing  lines  displayed? 

4.  How  often  are  they  changed? 

VII.  Inspection  of  counters 

1.  Are  goods  seasonable? 

2.  Are  they  in  good  order?  Are  there  any  broken  goods?  /a-e 

any  goods  soiled?  Are  they  ari’anged  separately?  Are 
they  in  the  right  places? 

3.  Aire  the  counters  arranged  in  such  a manner  as  to  secure 


greatest  efficiency’'? 

VIII.  Aittention  is  also  given  to 

1.  ITuniber  and  kind  of  complaints  per  week 

2.  Co'npetition 

3.  Shifting  of  pupxilaticn 

4.  Undeveloped  selling  possibilities. 

In  the  larger  chains  the  work  of  inspection  is  iierfomed  by  highly 
specialized  inspection  departments.  For  example,  in  the  Great  A^tlantic  and 
Pacific  Tea  Coirxj-any  there  is  a general  field  supper intendent  at  the  home  office. 
Under  him,  in  each  of  the  fifteen  district  offices,  are  general  shaper intendents. 
Under  th.e  fifteen  general  superintendents  are  forty-four  s'aperintendents,  each 
supervising  about  seventy-five  stores.  There  are  about  six  assistant  S'o.ner intend- 


34 


ents  under  each  S’.iperintenden't.  Each  assistant,  or  inspector,  visits  twent^^-five 
stores  once  a ir.ont’n  at  irregi’dar  intervals. 

In  the  case  of  the  V'oolworth  and  Ihresge  stores  each  inspector 
visits  about  tv/enty  stores  each  month.  As  a matter  of  fact,  inspection  once  a 
month  is  the  rule  in  all  chains  investigated. 

In  some  cases  the  inspector  is  required  to  moke  a formal  inventory, 
as  in  the  United  Cigar  Stores  of  Ainerica. 

/in  interesting  point  brought  cut  in  the  investigation  is  that  in 
every  instance  the  inspectors  v/ere  promoted  from  store  managers.  That  this  is 
perfectly  logical,  however,  can  he  seen  when  one  considers  v;hat  on  intimate  know- 
ledge of  the  stock  and  policies  of  the  organization  the  inspector  rust  have. 

Mention  has  already  'been  made  of  t!:e  fact  that  the  J.  C.  Penney 
Company  has  no  system  of  inspection.  As  was  explained  under  Ci^ganizaticn,  this 
companj''  differs  greatly  from  others  in  that  it  is  an  ingenious  combination  of  a 
corporation  and  partnership.  Since  the  Penney  managers  are  partners  in  the  busi- 
ness and  receive  reiomeration  accordingly  as  net  profits  are  made  in  their  stores, 
the  necessity  of  insp^ection  is  obviated. 

'Tliile  formal  conclusions  ai's  not  necessary  in  this  chapter,  it 
might  be  well  to  emphasize  the  fact  that  inspection  is  a necessary  f'anction  which 
cannot  be  eliminated  unless,  as  in  the  Penney  system,  something  else  is  dene  to 
take  its  place. 


' ■ Vp-v" 

•■»'•  •»*•*•  • ~ ^j-4- . » W*--  i.*  ■^T'. *.  »,i*A 


'■ }): 


36 

111  1918,  the  Childs  Coupany  (restaurants)  began  large-scale  advertising 
in  the  local  papers.^  At  first  this  advertising  was  very  general,  btit  it  has 
, gradually  hecorie  quite  specific  in  nature.  It  is  reported  that  its  advertising 
has  been  ver;^  sxiccessful  from  the  beginning. 

In  the  last  few  years  man;y-  advertisements  featuring  Woolworth  products 
have  appeared  in  magazines.  Their  wording  has  been  such  as  to  give  the  impression 
that  they  originate  with,  and  are  paid  for  by  the  V.’oolworth  organization.  As  a 
matter  of  fact  these  advertisements  are  vol'untarily  initiated  and  paid  for  in 
every  instance  by  the  manufacturers  of  the  articles  advertised.^ 

Another  fonn  of  chain  advertising  is  that  which  featiires  a few  products, 
Examples  of  this  kind  are  the  Great  Atlantic  and  Pacific  Tea  Company,  which  has 
been  using  rrnich  newspaper  space  to  advertise  its  leader,  Bokar  coffee;^  and  the 
United  Drug  Company,  which  advertises  nationally  perhaps  less  than  a score  of  its 
products,  usually  concentrating  attention  on  one  product  at  a time.*^ 

I'To  doubt  every  chain  which  does  any  appreciable  amount  of  advertising 
has  a more  or  less  definite  advertising  appropriation.  In  the  case  of  the  United 
Cigar  Stores  Company  two  per  cent  of  sales  is  charged  against  every  store  for  the 
advertising  fund."'  Since  two  per  cent  is  rather  high  it  seems  jiistifiable  to 
believe  that  this  incltides  charges  for  the  profit-sharing  coupons  which  are  an 
integral  piart  of  the  advertising  policy  of  the  canpany.  The  United  Drug  Company 
sets  aside  a certain  per  cent  of  profits  each  year  for  promotion  work.  The  ad- 
vertising appropriation  is  planned  one  year  ahead  but  is  revised  every  three 
months 

1 Advertising  and  Selling,  January,  ISIS. 

2 V.'orld  Retailer,  June,  1922,  p.  8. 

3 National  Advertising,  J-^une,  1922,  p.  S4. 

4 Cherington,  Advertising  as  a Business  Force,  p.  20C. 

5 Ibid,  p.  175. 

6 Ibid,  p.  200. 


6V 


From  what  has  been  said  it  is  possible  to  generalize  so  far  as  to 
state  that  although  there  is  evidence  o:  considerable  chain  store  advertising, 
still  in  the  aggregate  it  is  not  yory  irriportant.  Those  lines  in  v/hich  advertis- 
ing is  used  most  are  grocery  and  drug,  while  five  and  ten  cent  stores  are  the 
strongest  non-advertisers.  There  are  three  factors  which  account  for  the  small 
amount  of  advertising  done  by  chain  stores;-  Cl)  Their  better  locations  obviate  it 
to  a certain  extent  a,nd  the  high  rents  forbid  it;  (2)  V.'indow  displa^/s  take  the 
place  of  advertising;  and  (o)  host  chain  stores  carry  convenience  goods,  which, 
in  contrast  with  shopping  lines,  require  less  a-dvertising. 

Although  there  is  no  statistical  data  upon  which  to  base  conclusions, 
it  does  not  appear  that  chain  store  advertising  will  increase  in  the  near  fut’ure. 
Such  an  increase  ir.ay  be  expected  when  ca-;*petition  with  other  chains  and  with  re- 
tail buying  associations  becomes  ver,y  keen.  At  the  present  tim;e  there  are  no 
indications  that  such  a situation  is  near  at  hand. 

Only  recently  have  retailers  beg"m  to  realize  the  ah..ost  endless  pos- 
sibilities of  window  displays.  As  usual,  the  chain  store  has  talcen  the  lead  and 
shown  what  could  be  done  with  windows,  hr.  IJ.  Mitchell,  display  manager  for  the 
Hexall  Stores  says:^  "Window  advertising  is  tremendously  valuable  because  it  is 
done  so  close  to  the  so-orce  of  supply  that  the  people  who  see  a display  have  no 
time  to  forget  the  article  shown  in  the  interval  between  seeing  it  and  entering 
the  store  to  b'oy." 

There  are  two  reasons  why  chain  stores  have  paid  so  cmch  attention  to 

their  window  displays.  First,  stores  with  good  window  space  command  s->ach  high 

rents  that  it  is  a matter  of  economy  to  use  the  window  space  efficiently.  In  the 

of 

second  place,  window  displays  for  the  most  part  take  the  place  /advertising,  so  it 
is  imperative  that  they  perform  their  Sanction  as  well  as  possible. 


1 The  V'.'orld  Hetailer,  April,  1922,  p.  1. 


68 


There  are  three  types  of  window  displays:^ 

1.  Comriiercial 
8.  Educational 
3.  Suggestive 

The  first  type  functions  to  sell  the  goods  in  the  window.  It  is 
usually  most  effective  when  it  is  composed  of  a large  quantity  of  an  article 
Sxiov;n  at  a special  price.  Related  articles  are  often  placed  in  the  window,  but 
their  number  should  never  be  so  large  as  to  detract  from  the  main  display.  These 
disj-lays  are  especially  effective  if  they  are  tied-up  with  the  manufacturer’s 
advertising. 

The  educational  displ.oy  is  one  which  shows  how  a product  is  made  or 
acquaints  the  prospective  purchaser  with  some  specific  facts  about,  or  'c^ses  of, 
the  product . 

The  third  type  is  or^e  v/hicli  is  used  to  suggest  some  definite  fact  or 
facts.  For  exaraple,  last  winter  a fresh  fruit  display  in  a drug  store  was  sug- 
gestive in  that  it  showed  that  fresh  fruit  v/as  used  at  the  soda  foimtain  even 
in  the  winter. 

Chain  stores  generally  use  the  coi.miercial  type  of  display,  although 
the  educational  and  suggestive  types  are  soi;ietimes  used.  Five  and  ten  cent 
stores  rarely  depart  from  the  ccru::iercial  type  of  display.  Both  the  ’foolworth 
and  Kresge  stores  use  the  principle  of  mass  display,  although  there  are  times 
when  the  suggestive  type  is  used.  An  exariple  of  this  is  the  display  in  the  early 
spring  which  suggests  household  and  garden  articles.  The  educational  type  of 
display  is  used  very  rarely.  This  is  on  siccoiuit  of  the  fact  that  chain  stores 
will  not  carry  articles  which  are  not  well  knovm.  The  attitude  of  the  F.  W. 
Y.'oolworth  Company  is  strikingly  portrayed  in  a statement  by  the  President 


1 The  Y'orld  Retailer,  April,  1922,  p.  1. 

2 Ibid,  p.  8. 


69 


"...VJith  any  product  the  chances  of  interesting  us  are  very  r/uch  better  if  the 
article  is  known  to  the  public;  and  r.any  prod’octs,  no  matter  how  rfier.it orious 
they  may  be...  have  no  appeal  at  all  for  us  unless  they  are  well  kno\'/n."  The 
dnig  chains  are  perharjs  the  greatest  users  of  the  educational  type  of  display, 
especially  in  connection  with  appeals  to  the  instincts  of  fear  - as, for  example, 
the  display  which  points  out  the  diseases  carried  by  insects,  and  vanity  - as 
in  the  case  of  the  display  illustrating  the  use  of  a cleansing  cream. 

Before  tailing  up  the  consideration  of  how  the  problerf  of  v;indow  dis- 
plays is  met  by  some  of  the  typical  chain  systems,  it  rr.ight  be  well  to  inquire 
into  scfrae  of  the  f'undamsntal  factors  considered  by  scientific  window  trimmers. 
Hr.  '’'illiarn  Gellar,  the  windov;  display  expert  who  arranges  the  windows  for  the 
Pennsylvania  Dr'ug  Company's  stores,  sa^rs:^ 

1.  Ihe  location  of  the  store  rust  be  considered  before  the  windows 
can  be  made  to  appeal  to  the  maximum  nurober  of  prospective  buyers. 

2.  A knowledge  of  hvsman  nature  is  absolutely  necessary. 

3.  Too  many  different  articles  in  a window  are  apt  to  confuse  the 
prospective  purchaser. 

4.  In  residential  sections  displays  should  be  concentrated  on  a fev/ 
selected  a,rticles.  . 

5.  Miscellaneous  displays  should  be  used  in  transient  neighborhoods. 

6.  The  displays  must  be  seasonable. 

7.  Handsome  displays  do  not  always  draw  customers;  they  must  convey 
a definite  sales  message. 

In  all  of  the  chains  investigated  there  was  some  provision  for  the 
training  of  window  trimmers.  In  the  Woolworth  and  Kresge  stores'^  the  stock 
boy  after  being  promoted  to  assistant  manager  begins  to  learn  the  details  of 


1 World  Retailer,  April,  1922,  p.  10. 

2 Intervie'ws  with  the  local  managers. 


70 


window  triiiirina  tjr  tearing  down  old  displays  and  assisting  in  putting  in  the 
new  ones.  These  chains  do  not  furnish  plans  for  a standardized  window  display; 
each  manager  uses  his  own  J-jdgir.ent  in  rralcing  up  the  display.  However,  it  v/as 
reported  that  the  managers  acquire  such  skill  in  determining  which  goods  v/ill 
sell  "best  during  certain  seasons  that  as  a result  most  of  the  stores  show  the 
sa.me  goods  during  a given  week.  Md  to  this  the  fact  tliat  the  nanagers  gradually 
acquire  definite  methods  of  displa^s^ing  and  combination,  and  you  liave  another  step 
toward  the  standardized  display. 

ilany  of  the  chains  have  standardized  the  Wfindov/  displays  in  all  stores. 
I'-otable  among  these  are  the  United  Drug  Company  (Rexall  Stores),  United  Cigar 
Stores  Company  of  America,  and  the  Great  Atlantic  and  Pacific  Tea  Company. 

The  United  Urug  Company  started  its  sales  pron'-otion  service^  about 
1913.  The  first  move  was  to  acq.uaint  about  100  Eexall  dealers  in  different  sec- 
tions of  the  co-ontry  with  the  service.  The  agreement  at  the  tin-e  v/as  to  pay 
$95  ann-oally  for  the  service,  if  found  valuable.  That  it  was  fo'und  valuable  is 
evidenced  by  the  fact  that  there  were  8,000  subscribers  in  1918.  Every  two  weeks 
each  subscriber  receives  material  and  instructions  for  a new  window  disp'-lay,  which 
has  been  worked  out  by  a corps  of  experts  at  the  main  office.  In  addition  to 
this,  expert  advice  is  given  on  such  iriatters  as  business  analysis,  turnover,  news- 
paper advertising,  store  fronts,  interiors  and  displays,  etc.  Service  r;en  make 
i^requent  personal  visits  to  the  stores. 

The  plan  of  the  United  Cigars  Stores  of  America  is  very  siroilar  to 
tin,t  of  the  Rexall  Stores  except  that  standard  practice  is  carried  o\'tt  tc  a 
greater  degree.  The  displays  are  designed  in  the  same  manner  as  those  of  the 
Rexall  Stor:^s,  but  each  store  is  required  to  install  their,  exactly  according  to 
the  directions  furnished.  In  addition  to  the  displays  window  banners  are  used 


1 /advertising  and  Selling,  January,  1918. 


71 


to  a considera’ole  e::tent, which  call  attention  to  variows  articles  and  special 
offers. 

The  sart:e  high  degree  of  standardization,  and  nmch  the  san^e  :r;ethcd,  was 
observed  in  the  display  service  of  the  Great  Atlantic  and  Pacific  Tea  CoiJiparij'-. 
Here  again  the  staiidard  ir.ethod  is  used  for  devising  displays,  and  each  week  in- 
structions sent  to  every  store  aanager.  A cojy  of  the  weel:ly  display  service 
sheet  is  appended  here.  It  is  reported"^  that  the  "Talking  Point"  plan  (see 
page  4 of  tajr.phlet)  has  resulted  in  a tremendous  increase  in  sales  of  the  articles 
featured. 

Prom  the  material  presented  in  the  second  part  of  this  chapter  two 
conclusions  are  inevitable.  First,  v/indow  displays  to  a large  extent  take  the 
place  of  advertising;  second,  the  systems  of  window  display  have  reached  a re- 
markably high  degree  of  standardization  and  efficiency. 


1 Interview  with  !Ir.  Strabel,  Local  Manager. 


. aU 


The  Window  Display 

A GROCERY  WINDOW  DISPLAY  SERVICE  ISSUED  EVERY  WEEK 

BY  THE  GREAT  ATLANTIC  & PACIFIC  TEA  COMPANY 
No.  86  Chicago,  III.  and  Cincinnati,  Ohio  July  20,  1922 


AIN’T  N aturc  grand  ! Six  months  ago  we  were  battling  with  a blizzard  and  wishing  for 
/ % the  good  old  Slimmer  time.  Now  the  twin  pests,  Heat  and  Humidity,  bring  a long- 
^ ing  for  January’s  snow,  ice  and  cold.  Hut  all  the  wishing  in  the  world  won’t  change 

1he  weather  one  jot — you’ye  got  to  take  it  as  it  comes,  but  you  can  make  hot  weather  a 
lot  easier  to  endure  by  using  good  judgment  about  your  own  eats — and  your  recommenda- 
tions to  your  patrons.  First  of  all,  of  course.  Iced  Tea  and  Iced  Coftee  will  knock  any 
thirst  for  a goal.  Salads,  Fresh  Fruits,  Oliyes,  Spaghetti,  Macaroni,  and  so  on,  you  know 
the  story  if  you’ll  stop  lo  think  a little  about  it.  People  liyc  in  comfort  in  climates  a lot 
hotter  than  ours,  hut  they  eat  the  right  foods. 


The  Great  Atlantic  ^ Pacific  T ea  Company 

NEW  YORK  CITY 


WINDOW  DISPLAYS 

I 

(PLACE  PRICE  TICKETS  | 

WINDOW  NUMBEPv  ONE  | 

This  Ims  Red  Circle,  8 O’Clock  and  Eokar  Coffee,  cans  and  ])ackages  of  N.  B.  C.  ^ 

Crackers.  Paj)er  is  laid  on  the  floor.  Trij)le  columns  of  Bokar  stand  in  the  front  cor- 
ners with  opened  cartons  at  the  base  of  the  middle  column.  Two  round  baskets  are  in  the 
middle,  one  witli  8 O’Clock  and  the  oilier  with  Red  Circle  Coffee.  Bags  are  arranged  around  | 

the  baskets.  Other  bags  form  curved  rows  behind.  Between  the  flaskets  is  a column  of 
Bokar  cartons.  Other  cartons  are  in  the  middle  of  the  background  on  a box.  At  the  sides 
are  cans  and  jiackages  of  N.  B.  C.  Crackers.  Near  the  entrance  Coffee  is  disjilayed.  Place 
signs  on  the  glass. 


j NUMBERTWO 

i 

I WEEK  OF  JULY  20th 

n 

KNK  SPACES  ARE  SHOWN) 

I WINDOW  NUMBER  TWO 

i 

Baked  T>eans,  Canaied  S]5a.gl\etti,  Potted  Meats,  Devilled  Ham,  Pickles,  Jams,  Jellies, 
Mayonnaise  and  Salad  Dressings,  Vinegar,  Peanut  Rutter,  Apple  Butter,  Marma- 
^ lade,  M.  M.  Creme,  Olives,  Ketchup,  Chili  Sauce,  Shredded  Wheat,  Kellogg’s  Corn 

Flakes  and  Puffed  Rice  arc  shown. 

Pa])or  is  laid  on  the  ffoor.  In  the  middle  near  the  glass  Potted  Meats  and  Devilled  Ham 
are  shown.  Behind  are  Pickles.  Nearby  Marmalade  and  Jelly  are  displayed.  Steps  of  Beans 
' run  down  from  the  front  corners,  lower  steps  of  Beans  and  Spaghetti  are  nearby.  Behind 

the  high  stejrs  are  bottles  of  Vinegar  on  high  boxes.  Other  steps  of  Beans  and  Spaghetti  run 
down  from  these. 

■ Olives  stand  on  a box  in  the  middle  of  the  window.  Farther  back  is  a pyramid  of 

Grandmother’s  Beans.  Bottles  of  Mayonnaise  and  Salad  Dressing  stand  at  the  sides  on 
low  boxes.  Higher  boxes  hold  Ketchup  and  Chili  Sauce.  Puffed  Rice  and  columns  of  Pea- 
; nut  Butter  are  in  the  middle  of  the  background.  In  the  back  corners  are  columns  of  Shred- 

ded Wheat  and  Kellogg’s  Corn  Flakes.  At  the  side  near  the  door,  IM.  M.  Creme,  Apple 
• Butter  and  Jams  arc  shown.  Place  signs  on  the  glass. 


THE  WINDOW  IDISPLAY 


The  Talking  Point  the  week  of 
July  31st  will  be 

A&P  Salmon 

Th  IS  IS  the  hnest  Columbia  River  Salmon 
packed  under  our  personal  direction  to  insure 
the  Quality. 

D isplay  a few  cans  and  suggest  A&P 
SALMON  to  e\^er'^  customer. 


The  Great  Atlantic  ^ Pacific  Tea  Company 

NEW  YORK  CITY 


72 


COITCLUSIOITS . 

Tnese  have  "been  taken  uij  under  the  various  headin«?s.  However, 
several  general  conclusions  are  possible: 

1.  Alniost  without  exception  all  chains  have  been  formed  by  in- 
dividuals who  had  succeeded  as  irnlependent  retailers. 

2.  Tl'.ere  has  been  a more  cv  less  general  tendency  in  the  evolu- 
tion of  the  organic  structures  of  chain  stores.  T}-ie  step's 
have  been  (a)  Indiviaual  proprietor,  (b)  Partnership,  (c) 
Corporation,  (d)  He incorporation,  and  (e)  Consolidation. 

3.  Purtiier  integration  is  pointed  to  by  the  continued  expansion 

of  Ci_&ins  at  a rapid  rate,  and  by  the  rc.any  large  consolidations 
T’lis  tendency  toward  consolidation  will  probably  be  pai'tly 
balanced  by  the  creation  of  new  chains. 

4.  Periods  of  depression  have  had  practically  no  effect  upon 
chain  stores. 

5.  Vi'ithin  the  next  decade  there  should  be  an  influx  of  jobbers 
into  tlie  chain  store  field.  Tliis  seems  inevitable  because 
their  customers  are  leaving  them.  Jobbers  are  the  logical 
chain  store  operators. 

6.  Bu^^ing  associations  have  been  increasing,  but  it  is  not  likely 
tha,t  they  will  have  a curtailing  effect  on  chain  stores  for 
some  time  to  come.  T’ois  is  due  mainly  to  the  fact  that  chain 
stores  v/ill  be  able  to  maintain  a higher  degree  of  efficiency 
for  at  least  a considerable  length  of  time. 


if  ■> 


lV4^'  ^ 


\ * 


4<i 


'ii  ■ ‘•!'i¥i 


>;vJS 


V 'r 


£9 


5f'  , 7^ 


yff  ‘ : s 


, I', « 


i' 


iVt 


jfl* 


r 


^ '*5.*  ■’  * ^ '■ 

' »i 't 


V 


r^'> 


,+^:- 


Vv.T; 


.'<'  T■^< 


■;,h,lik'A 


'4&»< 


fT...-' 


■^/i■ 


-TTlDt 


'(Ti 


iP' 


; • W ' /■)  , •;■  '.*L>  >-i  xvt  i.  ' ^i'-'Al  &■  I/'  i ■' 

J*  • . .jj  *'¥•5y^'  m.  ■.'  - *•  - » 


m 


4 » 


-vil 


I 


..  Iti. 


. < > i ; .It;, ; :■■  ' •:  ^ ' T>-  *'■«*''•  • // 

“*  # '"^  • ‘ ‘ /r  '**  ^*^  * ’ " ' •'  • 1 • ‘ • '*m' 

u .'Vie  ■: 


4:> 


S) 


r'  • , ■ 1 1*  . I ^'1  '■  » 1 f '»  t ■'  "'  ^ ^ 

i5a-,v  -*;  • l1  vn  ';X;U'4ii7cu1-  > 


*V*i» 


m 


M 

m" 


■ ^ ,V.'^ 


■'’r^c 


.#J 


'■Tl.  ■'. 


4,^.i 


'■•V" 


Cl{ 


du’ 


Mk 


I’lJA 


;'!.'•  ' r 


' .(triit  Ap'‘i-  '-'i  45^^\L¥>‘ft' M 

''  ■ '■■h  r: , '* 


1 1. 


1^'  M 


4. 


ffl'i'' 


U\  "*■•' 


II^. 


|;&rtppfi:’ 


M]0  ISTA 

..J(  > 


73 


7.  If  chain  store  expansion  continues  at  the  present  raj  id  rats 
it  will  not  be  long  "before  additional  evidences  will  he  seen 
of  decentralized  "buying. 

8.  The  agitation  against  chain  stores  "by  many  Cliambers  of  Ccraoerce 
seems  to  indicate  that  chain  stores  will  not  meet  with  the 
average  aiiiount  of  success  in  small  towns. 

9.  Jo"b"bers  have  done  much  to  educate  independents,  "’:ut  efficien- 
cy, economy,  and  cleanliness  will  have  to  "be  more  firmly  im- 
pressed upon  them  "before  they  can  compete  with  the  chains. 

10.  C}-:ain  stores  lose  many  good  managers  because  they  do  not  pay 
ths!:i  well  enough.  It  seems  that  the  Penney  System  offers 
the  best  inducement  to  its  managers. 

11.  Roger  V'.  Pabson  su.ggests  the  possibility  of  chain  store  em- 
ployes forming  a union  as  a means  of  gaiiiing  increased  recogni- 
tion. 7hth  the  present  low  standard  of  wages  in  most  chains 
this  would  be  neither  impossible  nor  imiprcbable. 

12.  llaimfacturers'  chadns  will  probably  not  increase.  Theirs 
seems  to  have  been  but  a temporai’y  ir.ovs  to  gain  control  over 
pricing  and  distribution.  Tnis  seems  especially  apparent  in 
the  shoe  tr.ade,  where  the  national  Slioe  Retailers’  Association 
is  bringing  pressure  to  bear  against  the  mairafactra-’er s'  sh^ 
chains. 

13.  Investigation  has  shown  that  the  majority  of  criains  are  still 
headed  by  the  originators.  TZiis  might  lead  to  the  conclusion 
that  the  rapid  ejq:ansion  of  chains  has  been  due  to  the  driving 


' s r'  ^ \ • ■.  , -..-,1^,.-^, ‘ r,'i^ * 


1.  ■■  'J 

{ ' 


\ 


f 


1 


» 


I 

t : 


i 


\ 


\ 


i 


\ 


I ») 


Iw 


; 


# , . 

t W 


-y'l' 


,'.'i  ' • '.  ''  i'.:\- 


J 


I ; 


. f'.,' 


•l 


74 


force  of  these  leaders  and  that  chains  v;ill  sraffer  a sliuGp  v/he 
longer  head  the  organizations.  I-Ovvever,  the  policies  of  chain 
ly  standardized  that  continued  success  maj;-  he  expected  vdien  th 
give  way  to  the  new  generation. 


n these  men  no 
stores  are  sc  high- 
e original  leaders 


75 


BIBLIOGRAPin 

Books 

Agassiz,  G. , "Chain  Stores  and  the  High  Cost  of  Living." 

But  lei’,  B.  S.  , "Llarketing  ’.lethods.  " 

Cl'.erington,  ?.  T.,  "Advertising  as  a Business  Force." 

Cherington,  P.  T. , "Fne  Advertising  Book,  1916." 

Cherington,  ?.  T.  , "Tlie  Elements  of  Marketing," 

Copeland,  H.  T.,  "Marketing  Prohlems. " 

Bavid,  r.  Ii. , "Eetail  Store  Management  Problems.  " 

Buncan,  C.  S. , "Marketing  - Its  Problems  and  Methods. " 

Field,  C.  C.,  "Retail  Bu^'ing. " 

Fislc,  J.  F.  , "Retail  Selling." 

Gerstenberg,  C.  S.  "Principles  of  Business. " 

Moody's  Manual  - 1905-1921.. 

Mystrom,  P.  F.  , "T!:e  Economics  of  Retailing.  " 

Sliavv  Ccn^p.ar.;^  - ("Graphic.ol  and  Statistical  Sales  Helps." 
("How  to  R’an  a Store  at  a Profit." 

Svvinney,  J.  B.  , "Merchandising." 


76 


?erlcdical3 

Adruiiiistration,  Ilarc’i,  1921,  p.  229. 

Advertising  ar.d  Telling,  January,  ISIS. 

Current  Affairs,  Septei.ier  12,  1921,  p.  1. 

Current  Opinion, 

September,  1912,  p.  211. 

Eeceraber,  1914,  p.  436. 

I]ver5^bGdy ' s I.Iagazine,  'Toverfber,  1916,  p,  303. 

Illinois  Journal  of  Conr_erce,  June,  1922,  p.  7. 

IlcClures,  January,  1914,  p.  109. 

Mercantile  Co-Operator,  June  5,  1922,  p.  6. 

Modern  Merc'aaiit  and  Grocery  World, 

January  31,  ISIS,  p.  5. 

August  28,  ISlo,  p.  17. 
rebraary  5,  1917,  p.  15. 
national  Advertising,  Jtine,  1922,  p.  64. 

Printers'  Irdc, 

IToveniber  16,  1911,  28,  "Gigantic  Woolwcrth  Chain." 

December  7,  1911,  pp.  4^1-46,  "Welding  First  Links  in  a Chain 
System. " 


December  14,  1911,  pp.  3-6,69,  "United  Cigar  .Stores,  Practices 
and  Policies. " 

December  21,  1911,  up.  36-42, "United  Cigar  Stores,  Practices 
and  Policies. " 

December  23,  1811,  pp.  3-8,  66-67,  "United  Cigar  Stores, 
Practices  and  Policies."  ' 


m ' 


■'T',  ' 


: ;U' 


k.J 


j.  [ - r.  , 


*• 

t ' 


J a '•  * 


77 


x-'r int er  s ' InLc  (Cont . ) 

Marc'r  21,  1912,  pp.  3-lC,  117-118 , ’’Clxain  Store  Tconornies 
Practicable  in  ’.'any  Lines.  " 

Aug'ast  12,  1912,  pp.  23,  32-35,  ’’Setting  "axiiircoix  Sales  'Out  of 
a Chain  System. ” 

Jialj-  1C,  1913,  px  . 3-6,  27-28,  ”Kcw  to  Start  a Chain  of  Maxm- 
f acturer  s ' St  ores . ” 

July  17,  1913,  pr . 36-40,  "Some  Essentials  of  Chain  Store 
Management . ’’ 

July  24,  1913,  pp.  3-8,  "A  Successful  Profit-Sharing  Scheme 
for  Chain  Stores.  ’’ 

July  31,  1913,  x-P*  55-58,  "Some  Pointers  on  Management . " 

Augast  7,  1913,  x>P*  83-84,  ’TLotail  Chain  Store  Evolution." 

September  25,  1913,  pp.  74-76,  "Pexall  aiid  A.P.S.  now  National 
Advertisers.  ’’ 

September  1C,  1914,  p.  3,  "V.ny  Advertisers  mst  give  Chain 
Stores  Attention. " 


September  17,  1914, 


S3,  ’’Advertisers  and  Dealers  see  Danger 


in  Chain  Stores." 

Septer.A)er  24,  1914,  p.  22,  "Reasons  for  Belief  in  this  Danger." 


October  8, 

1 c / 

F • 

33, 

"Hew  the  Chains  are  taking  over  th 

Retail 

Field 

11 

October  15, 

1914, 

P • 

71, 

’’’Humber  of  Chains  in  Each  Field.  ’’ 

October  22, 

1914, 

P* 

60, 

"Concentration  of  Ov/ner  ship . ’’ 

October  29, 

1914, 

p. 

72, 

"Advaxotages  in  Organization  and 

Financing. " 


x.cvemcer  5,  1914,  p.  58,  "Advantages  in  Financing." 


X, 


,1 


\ 


V 

\ 


t( 


« 


•> 


\ 


. \ 


? ' 


’^1 


r 

f 


I. 


1 


M 


t- 


"^  • ? 


% *f 


"r 


t''*  cv"' 


r 


* 


9\  , 

t' 


u 


■4' 


• » / • 

■' 

^ . M ■" 

, * ■'*i?,'A'  '''■^ 


< 


5 

' 1 

,.'  ',  V 

. • ' ,ih  - ‘.' 

- .!'  >'!' 

( „■'  4 .;  > J <1  i 1*  ^ - 4 iki  ' I 

, ;/  V y,- " ' 

. ' :!.  1 f.  , . • • V 


78 


Printers 


' Ir-li  (Cont.) 


-Toverriber  12, 

1914, 

T). 

53 

, ’’Ilethods  of 

Picking  Sites.” 

ITov ember  IS, 

1914, 

P- 

64 

, ’’Advantages 

in  Buying. ” 

Pecemher  3, 

1914, 

p . 

S'. 

”Adv  ant  .ages  in 

Selling. ” 

Bsc ember  10, 

1914, 

p. 

43 

, ”Keei:dng  up  T 

rained  Crgai-.ization.  ” 

Becember  17, 

1914, 

p. 

20 

, ’’Ermp  1 oy:.:ent  o f Ac c ount  i ng . ” 

Bee ember  24, 

1914, 

p. 

5S 

, ’’Surraary.” 

Janaai*y  16, 

1913, 

pp. 

3-! 

3,  97-100, 

at  your  Branch  Ilanager 

is  lip  *igainst . " 

i.iay  4,  1£16,  p^j.  41-44,  49-53,  ”IIow  Penney  Cliain  finds  and 


trains  ProfitalDle  Partners.’^ 

April  5,  1917,  pp.  101-108,  ”C:iains  maiang  Independents  Setter 
Her chant  s. ” 


Septeraher  13,  1917,  pp.  83-84,  88,  "L'ethods  of  the  nan  who 
Founded  a Cliain  of  3500  Stores.” 

Lecer^iher  20,  1917,  p',  17,  "In  the  Piggly-Wiggly  Stores  the 
Product  has  to  Sell  Itself.” 

i.Iay  23,  1918,  pp.  3-3,  110-115,  ’’Tremendous  ITew  hai’ket  Spinings 
from  Five  and  Ten  Cent  Store  Expunsicn. ” 

April  17,  1919,  pp.  19-25,  ”IIow  Foolworth  Built  his  Fonderful 
pi  st  r ihut  ing  I.Iachine . ” 

January  8,  1920,  pp.  S5-66,  ’’’Jew  Rockefeller  and  \Tnelan  Prug 
Ch.ai n s wc rr y Ilanuf  ac tur  er  s . ” 

January  15,  1S2C,  pp.  17-20,  177-180,  ”Is  Collective  Buying  the 
Answer  to  the  Chain  Store  Ilenace?” 
x^ehraary  i.9,  1920,  p.  44,  ’’Row  to  iCQep  Informed  on  Chain  Store 


Levelopnents. ” 


— 7 

Printers'  Iri;  (Cent.) 

April  15,  1S20,  pp.  153-154,  "United  Retail  Stores  Enter  Mai:y 
Eields  of  Merchandising." 

April  28,  1221,  p.  177,  "Analysis  of  t"ie  Chain  Stores  “by 
Yh ole  sal e G-r  o cer  s . " 

Hair  12,  1221,  pp.  17-18,  "Phat  the  United  Cigar  Stores  Company 
has  Accomplished  in  2C  Years." 

Printers'  Ink  Monthly,  Jnly,  1921,  p.  22. 

Retadl  Ledger,  Second  ITovemher  Issr.e,  1921,  p.  6. 

System, 

June,  1914,  p.  537. 

LI^,  1920,  p.  252. 

February,  1221,  p.  185. 

April,  1922,  p.  323. 

VJorld  Retailer,  A.pril,  1922,  pp.  1-lC. 

V, 'or Id's  Fork, 

April,  1213,  p.  G59. 

February,  1218,  p.  352. 


